US report shows a build in crude inventories due to weak demand.
Oil fell below $67 a barrel on Wednesday, after a U.S. government report showed a build in crude inventories last week in the world's top consumer due to weak demand from refiners and an uptick in imports.
London Brent, seen for now as more representative of global prices than U.S. oil, settled down 75 cents at $66.25 a barrel, adding to losses of 65 cents on Tuesday. U.S. crude fell 72 cents to $63.68.
U.S. crude oil inventories rose by 1.1 million barrels last week due in part to continued low demand from refineries amid a string of breakdowns, the Energy Information Administration said.
The increase, aided by higher imports, was slightly higher than analysts had forecast.
"The EIA data showing crude stocks rose last week was within market expectations and, as such, you are seeing a sell-off," said Mark Waggoner of Excel Futures in Huntington Beach, California.
Meanwhile, stocks of gasoline dropped 1.1 million barrels, the 12th straight week, bringing inventories 15 percent below levels in early February.
Traders said a likely recovery in refinery operations in coming weeks could reverse the declines in gasoline stocks and mark the beginning of a larger price drop for crude.
"A major correction is under way," said Mike Fitzpatrick, vice president at Man Financial. "The market had clearly gotten ahead of itself, but needs further refinery news to keep upward momentum going."
Adding further pressure to oil prices, the U.S. Department of Energy said last Wednesday it would stop buying crude for the Strategic Petroleum Reserve until the end of the summer driving season.
The move could allay some traders' concerns that the U.S. government's oil-buying would take about 133,000 barrels per day off the market in June, just as refineries ramp up to churn out gasoline to meet peak driving demand.
"The department plans to suspend direct purchases of oil for the SPR until at least the end of the summer driving season," the department said in a release.
Claude Mandil, executive director of the International Energy Agency, said prices were too high and global stockpiles were too low.
"Stocks are not building. There is not enough oil in the market," Mandil told reporters in Riyadh, Saudi Arabia.
But the secretary-general of the Organization of Petroleum Exporting Countries said there was no need to increase supplies.
"The market is very stable," Abdullah al-Badri said.