Oil reversed early gains and dropped below $60 a barrel as a downturn in US equities added to pressure from high US oil inventories and persistent concerns about the timing of any economic recovery.

US light crude fell 45 cents to $59.69 a barrel by 3.28pm - on course for the seventh straight day of declines. London Brent crude eased 11 cents to $60.32 a barrel.

Earlier, US crude prices had rebounded as high as $61.62 after a 4% fall yesterday that meant oil was more than 15% lower so far in July.

Yesterday, bearish US oil data highlighted how weak demand is in the world's largest energy consumer.

US diesel and heating oil stocks have swelled to their highest level in almost 25 years after jumping by 3.7 million barrels last week, data from the Energy Information Administration (EIA) showed.

The drop in oil prices since the end of June was the longest and steepest decline so far in 2009. Prices had been rising since February, more than doubling from lows hit near $33, as traders started to price in an eventual recovery.

PEC's 2009 World Oil Outlook has weighed further on sentiment as it said world demand for oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction.