Oil prices fell nearly a dollar on Wednesday to below $58 a barrel, extending a 6 percent slide since Monday after government data showed an unexpected increase in US inventories. US crude futures settled down 94 cents to $57.26 a barrel, after plunging $2.34 on Tuesday.
The market is more than $3.50 below Monday's record of $60.95 a barrel. London Brent crude fell 81 cents to $56.37 a barrel.
US crude stocks rose last week by 1.1 million barrels, countering expectations for a decline, as imports rose to their second-highest level on record, a report from the US Energy Information Administration said.
"The report is bearish," said Bill O'Grady, analyst at A.G. Edwards. "For this time of year, a build in crude is unusual, especially with 96 plus (percent) refinery capacity utilisation."
Refineries cranked up production rates by 1.5 percentage points to 96.3 percent, helping boost stockpiles of gasoline and distillates, the report showed. Gasoline stocks rose 300,000 barrels and distillate stocks, which include heating oil and diesel, rose by 1.7 million barrels.
While the EIA report calmed some worries over inventory levels in the short term, dealers said losses in oil prices were tempered by fresh signals that costly fuel has done little to cool red-hot demand.
"It's acting as a very mild brake on the economy," said analyst Deborah White at SG CIB Commodities. "But strong economic growth still means strong product demand and a lack of refinery capacity to make them, and therefore higher prices."
Over the last four weeks, US gasoline demand has averaged 2 percent stronger than last year, while distillate fuel demand has averaged nearly 6 percent higher, driven by strong consumption of diesel by the trucking industry.
Oil prices have rallied around 33 percent since the start of this year amid escalating concern that refineries will find it hard to match the growth in demand, particularly when the Northern Hemisphere winter hits.
In an effort to cool prices, the Organisation of Petroleum Exporting Countries is expected to decide on an output increase of another half a million barrels this week even though it is already pumping crude near its highest level in 25 years.
The output increase comes despite assurances from Saudi Arabia that it is already supplying all the crude that customers want.
"The Saudis have been unable to find customers for additional oil despite having offered it," said brokerage Refco in a report.
Opec members have said the real problem is that global refining capacity has not increased in recent years to match speedy product demand growth in the United States and China.
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