Oil fell nearly $1 to below $53 a barrel on expectations US data would show an increase in crude stockpiles.
US light crude for May delivery fell 81 cent to $52.99 a barrel, reversing direction after yesterday's climb to a near three-month high. London Brent crude fell 47 cent to $53 a barrel.
Analysts said they expected oil inventory data to be released by the American Petroleum Institute later tonight and the US Energy Information Administration tomorrow would show a 1.1m barrel build in crude stockpiles.
Energy demand in the world's biggest consumer has been hard-hit by the economic meltdown, buffering inventory levels, and global consumption has been shrinking for the first time in a quarter century.
Adding pressure, the dollar rose against the yen and the euro as currency investors bet a US plan to remove bad loans from banks' balance sheets would do a lot to help the US economy to recover.
A stronger dollar can hit commodity prices by reducing the purchasing power of buyers using other currencies.
Oil prices have climbed from under $33 last December, partly due to aggressive supply cuts from OPEC, but remain almost $100 below last summer's peak.
Oil prices also took a hit after media reported that China's refined fuel stocks rose 11% in February despite a sharp post-holiday rebound in domestic sales, suggesting demand in the world's No 2 consumer may be weaker than thought.
