Oil fell below $50 on Wednesday, after U.S. crude oil stocks rose last week to their highest level in nearly two decades.
By 1502 GMT (11:02 a.m. EDT), U.S. crude for May delivery was down 42 cents at $48.99 a barrel, off a session high of $50.79.
ICE Brent crude was 54 cents lower at $51.42.
Weekly fuel supply data from the world's top energy consumer showed a 5.6 million barrel rise in crude stocks last week. This was a much bigger jump than analysts had predicted. Those polled by Reuters had expected a rise of 1.9 million barrels.
Crude stocks in the United States last week reached 366.7 million barrels, according to the government data, the highest total since the week ended September 21 in 1990.
Another week, another bearish inventory report, said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures Inc. It's been negative week after week and yet the market hasn't collapsed.
It's defying fundamental logic, focusing instead on the dollar, the strength in the stock market and inflation fears -- that's what's keeping the oil price up.
The global recession has hit oil demand which has been contracting at a rate not seen since the early 1980s.
The oil price has tumbled too, down almost $100 a barrel from a record of more than $147 in July last year.
Prices have hovered in a $47-$54-range for the past four weeks, having moved up from a recent low of $32.40 in December.
OPEC has cut output by 4.2 million barrels per day since last September to try to prop up prices.
And a rally in equity markets this month on hopes the world economic outlook might be brightening has helped boost oil prices, despite its weak supply/demand fundamentals.
We still expect the U.S. stock market to be the intermediate price driver for most commodity complexes over the next few weeks, Edward Meir of MF Global said in a research note.
Earlier the Organization of the Petroleum Exporting Countries had added to the market's gloomy fundamentals with a prediction that world oil demand would fall by 1.37 million barrels per day in 2009.
This was more than OPEC's previous forecast for a fall of 1.01 million bpd.
In the coming months, the market is expected to remain under pressure from uncertainties in the economic outlook, demand deterioration and the substantial supply overhang, OPEC said.
Both the International Energy Agency and the U.S. government agency EIA have also just reduced their global demand forecasts.
In its monthly outlook released on Tuesday, the EIA cut its 2009 world oil demand forecast by 180,000 barrels per day to just over 84 million bpd.
Royal Dutch Shell's
(Editing by Keiron Henderson)