UPDATE 8-Oil falls to $58 as U.S. fuel stocks weigh

(Updates prices, changes dateline previous LONDON)

NEW YORK, Feb 14 (Reuters) - Oil fell nearly 2 percent to $58 a barrel on Wednesday after a U.S. government report showed a smaller-than-expected drop in heating oil inventories in the world's top energy consumer.

U.S. crude CLc1 settled down $1.06 at $58.00 a barrel, dipped as low as $57.50 in earlier activity. London Brent LCOc1 fell $1.35 to $57.43 a barrel.

U.S. distillate stocks including heating oil fell by 3 million barrels last week, the Energy Information Administration said, less than the 4.2 million barrel draw forecast by analysts. [EIA/S]

"The distillates decline should disappoint market bulls following the recent cold spell last week," said Christopher Jarvis, senior analyst at Caprock Risk Management in New Hampshire.

Oil rose $1.25 in New York on Tuesday after the International Energy Agency, an adviser to 26 industrialized countries, raised its forecast for world demand in 2007.

Prices have climbed from a 20-month low of $49.90 reached on Jan. 18 after colder weather boosted fuel demand in the huge U.S. Northeast heating oil market and OPEC members reduced supply. Oil is still down from an all-time high of $78.40 hit in July 2006.

The drop in oil was limited by EIA data showing U.S. crude and gasoline inventories both unexpectedly declined last week. Crude stocks fell by 600,000 barrels and gasoline by 2 million barrels.

"There were some bullish aspects to the release," BNP Paribas said in a report. "Gasoline recorded a surprise fall."