Oil prices slid more than $1 to trade well below $53 a barrel yesterday, extending the previous day's heavy losses as funds took profits from a 12 per cent gain in the past month.
A big stock build in the United States encouraged selling, although losses were limited by a weaker dollar and longer-term worries that energy demand growth this year would outpace supply.
US light crude fell $1 or 1.9 per cent to $52.56 a barrel in early European trade, having earlier touched $52.50, the lowest price since March 2. Oil tumbled $1.23 on Thursday, the first decline after a six-day rally.
Brent crude in London traded down another $1.16 cents to $51.50 a barrel after ending 66 cents lower on Thursday. It jumped to a record $54.30 on Wednesday.
Wednesday's US government report showed another build in US crude oil inventories last week - the fourth in a row - taking supply to the highest level in eight months.
"The stats were really bearish, so we're seeing some profit-taking. In the longer term though the funds are bullish and could buy up the market again," said Tony Nunan at Mitsubishi Corp. in Tokyo.
Strong global demand and a late-winter cold snap helped send oil prices soaring this week to a four-month high of $55.65 a barrel, two cents shy of October's all-time peak.
But Opec oil producers are keeping a close watch over rising stocks in developed countries ahead of the usual second-quarter slowdown, when temperatures warm up.
"Opec is keen to prevent a rise in world stocks. So if anything, decreasing, rather than increasing, output is their preferred option," commodities strategist David Thurtell said in a report.
Iran, Qatar, Venezuela and Algeria have come out in favour of keeping production steady. More support was seen in China's February crude oil imports, which bounced back from a 14-month low in January, a sign that demand in the world's second-biggest consumer was not slowing.
Analysts had been counting on a rebound in imports after January data showed a steep 24 per cent fall, the first annual drop for two and a half years, casting a cloud over expectations that strong Chinese demand will help keep prices high this year.
On the supply side, top exporter Saudi Arabia has told Asian customers it would keep oil supplies steady in April, a sign that Opec may leave output unchanged at next week's meeting in Iran.
Kuwait also plans to keep crude supply to Japan unchanged for April, traders said yesterday.
But Opec oil to be shipped in the four weeks to March 26 fell 130,000 bpd to 23.93 million bpd, hit by a slump in spot loadings from the Gulf, a leading oil shipping analyst said.