Brent crude fell more than $1 on Wednesday to a three-week low near $107 as pessimism about Japan's nuclear crisis offset concern about Middle East unrest after Bahrain declared martial law.
In Japan, another fire broke out and radiation levels rose at the earthquake-crippled Fukushima nuclear plant, triggering international alarm and suggesting the crisis may be slipping out of control.
Brent for April fell as much as $1.17 to $107.35 a barrel, its lowest intraday price since February 23, and was down $1.11 by 11:35 p.m. ET. Prices reached almost $120 on February 24 as violence escalated in Libya, disrupting oil output. Prices slumped 4.5 percent on Tuesday, the biggest drop in more than a year.
Sentiment is still at very low levels with investors' appetite for riskier assets very much off the table, said Ben Le Brun, an analyst at CMC Markets.
The market is looking for a change in global sentiment, with the crisis in Japan being compounded by escalating violence in the Middle East.
Academics and nuclear experts agree that the solutions being proposed to contain damage to the Daiichi reactors at Fukushima, 240 km (150 miles) north of Tokyo, are last-ditch efforts to stem what could well be remembered as one of the world's worst industrial disasters.
Bahrain's king declared martial law on Tuesday as his government struggled to quell an uprising by the island's Shi'ite Muslim majority that has drawn in troops from fellow Sunni-ruled neighbor Saudi Arabia.
An uneasy calm fell on Bahrain overnight, and a defense ministry statement suggested action against protesters camped out for weeks at Pearl roundabout could be swift. Forces may impose curfews, disperse gatherings and evacuate areas, it said.
Bahrain is driving distance from the world's largest oil fields and oil terminals in top exporter Saudi Arabia.
In Libya, Muammar Gaddafi's government forces pushed eastwards toward the Libyan rebel stronghold of Benghazi and his government predicted victory within days while world powers debated imposing a no-fly zone to help stop him.
U.S. crude fell 70 cents to $96.48.
(Reporting by Alejandro Barbajosa; Editing by Clarence Fernandez)