LONDON, July 4 Reuters Oil prices edged lower on Thursday, retreating from the previous session39;s multimonth highs, with investors taking profits as demand caution remained in focus despite last week39;s decline in U.S. inventories.

Brent crude futures were down 43 cents, or 0.49, at 86.91 a barrel by 0855 GMT while U.S. West Texas Intermediate WTI crude futures fell 49 cents, or 0.58, to 83.39 in trade thinned by the U.S. Independence Day holiday.

In the previous session, Brent gained 1.3 to settle at 87.34 for its highest since April 30. WTI, meanwhile, had settled at an 11week high of 83.88.

Those gains followed a larger than expected decline in U.S. crude stocks. The U.S. Energy Information Administration EIA reported a 12.2 million draw in inventories. Analysts polled by Reuters had expected a draw of 680,000 barrels.

Given dollar weakness and a brighter outlook for U.S. fuel demand after the EIA data, Thursday39;s price weakness is not expected to last, said PVM analyst Tamas Varga.

The drop in oil prices on Thursday morning is partly attributable to traders taking profits after recent gains, said OANDA analyst Kelvin Wong.

However, German industrial orders fell unexpectedly in May, adding to signs that a recovery for Europe39;s largest economy remains elusive.

Demand concerns were heightened by U.S. data showing that firsttime applications for U.S. unemployment benefits increased last week while jobless numbers also rose.

Countering that, weaker economic…