By Alison Sider and Sarah McFarlane 

U.S. oil pared losses but remained depressed after another week of draining stockpiles took market participants by surprise.

Prices briefly popped above $50 a barrel after the U.S. Energy Information Administration reported that crude storage levels fell once again -- the seventh draw down in eight weeks -- before pulling back.

U.S. crude futures were down 48 cents, or 0.96%, at $49.48 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 64 cents, or 1.26%, to $50.15.

U.S. crude stockpiles dropped by 553,000 barrels in the week ended Oct. 21, confounding expectations of a 2.1 million barrel increase, according to analysts surveyed by The Wall Street Journal. An industry group had forecast Tuesday that stockpiles rose by 4.8 million barrels during the week,

"Clearly, the supply and demand balance are trending toward tightening," said Jason Bloom, director of commodity strategy at Invesco PowerShares.

The EIA also reported larger-than-expected draws from gasoline and diesel inventories. The total amount of all oil and refined products in storage fell by 8.7 million barrels.

Gasoline futures fell 2.21 cents, or 1.47% to $1.4784 a gallon. Diesel futures fell 1.16 cents, or 0.74%, to $1.5515 a gallon.

Despite weeks of draining stocks, some analysts have a cautious outlook on when supply and demand will come back into balance, particularly with U.S. production ticking higher for a second week in a row, according the EIA.

"We're entering winter with pretty robust inventories and climbing production," said Rob Haworth, senior investment strategist at the Private Client Reserve at U.S. Bank.

Analysts said the inventory report wasn't bullish enough to shake off concerns about the Organization of the Petroleum Exporting Countries' ability to reach a consensus about cutting production.

The latest hurdle to any deal among major oil exporters came from Iraq, OPEC's second-largest producer after Saudi Arabia, which said it needs oil income to fund its continuing war against Islamic State.

"It is increasingly evident that Iraq's ambitions are not in line with OPEC's preliminary accord to reduce output," brokerage PVM said.

Analysts say Iraq's refusal could entice smaller producers to also snub the deal or ask for special exemptions in November, when OPEC will meet to discuss the details of the cuts, including output quotas for individual members.

"The only countries that can afford to cut production are Saudi Arabia and Russia, but they would have the losing end of the deal if they are the only ones to cut," said Jonathan Chan, a Phillip Futures energy analyst.

Russia's unclear stance is also fueling uncertainty. It had previously signaled its willingness to join an OPEC cut, but recent comments by its oil officials show the country is likely pivoting away.

The bulls in the market, however, think that, given OPEC members are mostly petro-dependent economies, they may opt to scale back or limit output for now to jump-start prices.

"We think OPEC has endured low oil prices for far too long, with much damage already done on its fiscal space. That alone should coax the cartel to initiate a production cut," said Barnabas Gan, an economist at OCBC.

Jenny W. Hsu contributed to this article

Write to Alison Sider at alison.sider@wsj.com and Sarah McFarlane at sarah.mcfarlane@wsj.com

(END) Dow Jones Newswires

October 26, 2016 12:25 ET (16:25 GMT)