Oil fell below $68 a barrel on Wednesday, extending the previous session's 3 percent drop, after weak U.S. jobs data raised doubts over the strength of economic recovery in the world's biggest fuel consumer.
Investors were also awaiting weekly crude data from the U.S. Energy Information Administration (EIA) at 1430 GMT (10:30 a.m. EDT) for confirmation of Tuesday's bullish report from the American Petroleum Institute (API).
U.S. crude for October delivery was down 63 cents at $67.42 a barrel by 1316 GMT (9:19 a.m. EDT), off an earlier two-week low of $67.21. London Brent crude fell 50 cents to $67.23 a barrel.
The market seems to react on negative news but not on positive news. Good data yesterday failed to lift prices but bearish data today hit prices, said Carsten Fritsch, oil analyst at Commerzbank.
WEAKER STOCK MARKETS
World stocks fell on Wednesday, pressuring oil prices, with both Asia and Europe rattled by concerns over the sustainability of this year's equity rally. Wall Street looked set for a poor start after a private employment report showed U.S. firms cut more jobs than expected in August.
July factory orders at 1400 GMT (10:00 a.m. EDT) will give the next indication of U.S. economic recovery and offer more trading cues. Economist polled by Reuters expected factory orders to rise 2.2 percent in July, versus a 0.4 percent gain in June.
Earlier, oil prices rallied after API data showed that U.S. crude stocks fell 3.2 million barrels in the week to August 28, a larger drop than the forecast of a 600,000-barrel drawdown.
Less supportive news for oil prices came from China, where crude stocks climbed to near-record highs at the end of July, an industry newsletter reported, as imports outpaced the record amount of crude refiners processed.
Russian oil output hit a record high in August, nearing 10 million barrels per day as the country launched a new giant field, while gas production recovered from its lows on improved demand.
August oil output rose to 9.97 million barrels per day, up 0.6 percent from 9.91 million bpd in July and 1.5 percent higher than 9.82 million bpd in August 2008.
(Editing by Anthony Barker, editing by Anthony Barker)