US crude fell to a near seven-year low today, as oversupply concerns persisted, and prices were seen as vulnerable to further weakness in the run up to year-end.
Brent futures are down more than 11% this month and, having dipped below $40 per barrel, there are renewed expectations it might test 2008's low around $36.
Brent futures were 24 cents lower $39.87 per barrel having traded as high as $40.70 earlier today.
West Texas Intermediate (WTI) US crude futures were down 45 cents at $36.71 per barrel, having touched a low of $36.52, a trough since February 2009. WTI is down around 13% this month.
US crude inventories fell 3.6 million barrels in the week to December 4, compared with expectations for an increase of 252,000 barrels, US Energy Information Administration data showed.
The Organisation of the Petroleum Exporting Countries last week failed to reach an agreement on production quotas.
This led to fears that increased production from Iran and elsewhere would increase the glut further.
OPEC forecast today that oil supply from non-member countries would fall more sharply next year, a development that would suggest its strategy of defending market share is working.
Oil has traded in a tight range close to $40 per barrel since Monday when it fell to its lowest since 2009.
Analysts said that in thin liquidity up to year-end there is a good chance Brent will fall below its low since 2008 at around $38 per barrel.
Still, there were signs of more demand from China, the world's second-biggest oil user. Vehicle sales were up 20% in November from a year earlier to 2.5 million vehicles, the China Association of Automobile Manufacturers said.
However there was also fresh evidence of market oversupply. The EIA data showed that US distillate stockpiles rose by 5 million barrels, twice the expected increase and the sharpest increase since January.