NEW YORK?Oil prices dropped on Thursday, wiping out earlier gains despite government data showing a decline in jobless claims and diminishing crude stocks.

New York's main contract, light sweet crude for delivery in October, lost 42 cents from Wednesday to $74.25 a barrel.

Brent North Sea crude for October shed 70 cents to $77.47 a barrel.

Oil prices started the day higher after the American Petroleum Institute (API) estimated on Wednesday evening that crude oil stocks plunged by 7.3 million barrels last week.

But the Energy Information Administration (EIA) said in a report on Thursday that stocks last week dropped by a more modest 1.9 million barrels from the previous week.

Labor Department data indicating that the number of Americans filing new claims for jobless benefits last week fell faster than expected to 451,000, down 27,000 from the previous week's revised figure, also bolstered prices.

"When the EIA inventory numbers came out it was certainly not as bullish as the API data. Initially the market held together after the data but when the traders had a chance to reassess the data prices started to slip," said Tom Bentz, analyst at BNP Paribas.

"The barrel moved up towards $76 but what you have here is a classic case of failure."

Ahead of the report, the OPEC oil cartel held steady its forecast for world oil demand growth this year and in 2011, but warned on Thursday that prevailing economic uncertainty made forecasting difficult.

"Repeated revisions to world economic growth -- a key driver of oil demand -- have made forecasting oil market developments in 2010 particularly difficult," the Organization of Petroleum Exporting Countries (OPEC) said in its September monthly bulletin.

"The forecasts for oil demand are subject to frequent revisions. In fact, in recent years, actual demand has turned out to be lower than projected, leading to substantial downward adjustments," the cartel said.

"These developments underscore the need for continued caution about oil demand projections in a highly uncertain economic environment."

Nevertheless, OPEC said it was holding its projections for oil demand growth both in 2010 and 2011 steady.

This year, world oil demand growth was expected to grow by 1.05 million barrels per day (bpd) or 1.2 percent to 85.51 million bpd, unchanged from the previous forecast.

And next year, demand would also grow by 1.2 percent to 86.56 million bpd, OPEC predicted.