Oil fell more than 3 percent to below $48 a barrel on Wednesday after fresh industry data showing a build in U.S. crude oil stocks and the World Bank cut its forecast for China's economic growth this year.
In its weekly report, the U.S. Energy Information Administration (EIA) said crude oil stocks rose 2.0 million barrels to 353.3 million last week.
A Reuters poll had forecast a rise of 1 million barrels as refinery demand remained tepid and imports increased.
The EIA also said gasoline supplies rose to 215.7 million barrels, up by 3.2 million barrels, countering forecasts of a 1.2-million barrel drop.
Oil had fallen earlier in the session after data from the American Petroleum Institute on Tuesday showed crude stocks rose much more than expected last week.
U.S. light crude for April delivery was down $1.30 to $47.86 a barrel by 1500 GMT (11 a.m. EDT). On Tuesday, the contract gained $1.81 to $49.16, its highest settlement since December 1, 2008.
London Brent crude tumbled $1.10 to $47.14.
Oil has lost around $100 from a record high of almost $150 last July as economic meltdown has cut demand for fuel worldwide.
But prices, which sank to levels below $35 a month ago, have since stabilized in the $40 to $50 range, as producer group OPEC has targeted output cuts of 4.2 million barrels per day (bpd) since last September and vowed at a meeting on Sunday to achieve higher compliance from members to reduce production.
WEAK ECONOMY, WEAK DEMAND
Mike Wittner, global head of oil research at Societe Generale, said oil prices were near the top of the range seen over the last three months.
I don't see any reason fundamentally why we should break out of this range to the upside, he said. The picture remains the same: weak economy, weak oil demand.
Oil's gains on Tuesday were boosted by better-than-expected U.S. housing data and inflation, which drove U.S. stocks higher and lifted investors' risk appetite.
But other macro-economic data were not so supportive.
The World Bank cut its forecast for China's 2009 economic growth on Wednesday and said Beijing would undermine its own medium-term goals if it tried to offset the slowdown by further boosting investment.
In a quarterly economic update, the bank cut its projection of gross domestic product growth this year to 6.5 percent from the 7.5 percent outcome it had forecast in November. It said there were both upward and downward risks to its outlook.
Broker MF Global said it would take a great deal to turn around sentiment in the oil market and on the economy.
We find it hard to rationalize a sustained push beyond this mark, it said. The combination of all these variables makes the case that some length should be taken off the table here, as the energy markets have done too much, too soon given the prevailing fundamental and technical backdrops.
At 1815 GMT (2:15 p.m. EDT) on Wednesday, the U.S. Federal Open Market Committee will announce the outcome of a meeting on interest rates.
(Additional reporting by Fayen Wong in Perth; editing by Keiron Henderson)