Oil fell below $33 a barrel today after Saudi Arabia ruled out production cuts and US crude inventories rose, though a decline in US petroleum stocks limited losses.
Saudi Oil Minister Ali al-Naimi said yesterday production cuts would not happen, though more countries would join a deal to freeze output.
OPEC and non-OPEC producers who support the idea are planning a mid-March meeting, his Venezuelan counterpart said.
"Al-Naimi's remarks punctured an oil price rally that has lacked substance," said David Hufton of broker PVM. "The market correctly interpreted the presentation as bearish."
Brent crude was down 33 cents at $32.94 a barrel at 4.11pm Irish time.
US crude fell 85 to $31.02. Both dropped more than 5% in intra-day trading yesterday following the Saudi comments.
The US government's Energy Information Administration said today that crude stockpiles rose 3.50 million barrels last week.
Inventories on the Gulf Coast rose to the highest since at least 1990, after some refineries cut back production in response to low margins.
But petrol inventories fell for the first time since early November.
"It's a mixed bag for both bulls and bears as crude stocks continue to rise while gasoline and distillate stocks dropped," Chris Jarvis, analyst at Caprock Risk Management said.
"Overall, this week's data point will do very little to offset the Saudi oil minister throwing cold water on production cuts any time soon," he said.
Oil has slid from more than $100 a barrel in mid-2014, pressured by excess supply and a decision by the Organisation of the Petroleum Exporting Countries to abandon its traditional role of cutting production to boost prices.
OPEC and outside producers have stepped up diplomatic activity after prices slumped to their lowest since 2003 last month, with Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia saying on 16 February that they would freeze output.
One stumbling block in attempts to forge a wider agreement is Iran, which is increasing output after the lifting of Western sanctions in January and whose oil minister was quoted yesterday as calling the deal "laughable".