Oil fell by over a dollar toward $48 a barrel on Wednesday, adding to Tuesday's 3.7 percent loss on falls for equities and after weekly data showed U.S. crude inventories up far more than expected.

Crude oil stockpiles rose by 6.9 million barrels last week, the American Petroleum Institute (API) said late on Tuesday, far exceeding analyst forecasts for a 2.1-million-barrel build and sending prices sharply down in electronic trading.

Japan's crude inventories also rose, hitting their highest level in over a month as the country's worst recession since World War Two eats into demand for oil products.

The market has lost 6.6 percent over the past three sessions, also dragged down by stock markets that are taking a hammering at the start of what is expected to be a grim earnings season.

U.S. light crude for May delivery fell 97 cents a barrel to $48.18 by 0456 GMT, after falling as low as $48.10.

London Brent crude fell 58 cents to $50.64.

There is optimism that demand will start increasing in the medium term but the large inventories will prevent prices from rising much above $50 a barrel, said Toby Hassall, head of research at Commodity Warrants Australia.

The Energy Information Administration -- whose data is generally seen as more comprehensive -- will release its weekly report at 1530 GMT on Wednesday, and the market will watch for more signs of rising stocks.

A Reuters poll forecast an average build of 1.9 million barrels for crude stocks, already at their highest since July 1993.

Stock markets, which investors are watching for clues as to when oil consumption might rebound, are continuing to signal a dismal economic outlook, and the first signs from the earnings season were bearish.

Aluminum producer Alcoa Inc , the first company to report its quarterly results after Wall Street closed, showed a second consecutive quarterly loss as metal prices and the autos industry slumped.

Asian stocks slid for a second day on Wednesday with investors fleeing to the sidelines to await companies' outlooks.

Japan's main Nikkei index was down 2.76 percent by 0458 GMT, while the MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> fell 3.55 percent.

Adding further pressure on oil, the U.S. dollar rose as investors see the greenback as a safer haven at times of market stress, making U.S. dollar-denominated commodities more expensive for overseas investors.

OPEC, which has agreed cuts amounting to 4.2 million barrels per day (bpd) since September, is resigning itself to lower prices this year.

The cartel can live with oil prices of $50-$60 a barrel for the rest of 2009, a source close to the organization's Angolan presidency said on Tuesday, as many in the group have lowered their price expectations with the focus on rebuilding a damaged global economy.

(Editing by Michael Urquhart)

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