A deepening political crisis in Washington accelerated the decline in prices. Investors became increasingly cautious following the latest reports of links between Russia and the campaign to elect Donald Trump president.
Traders said news that advisers to the president’s campaign last year had at least 18 undisclosed contacts with Russians had unsettled investors. Crude futures turned sharply lower after Reuters reported the news.
“Sentiment is fragile so it does not take much to rock the boat even further,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank. “This is a general risk-off move.”
Both benchmarks rose on Wednesday after news of a drawdown in U.S. crude inventories and a dip in U.S. output. The U.S. Energy Information Administration said inventories fell 1.8 million barrels in the week to May 12 to 520.8 million barrels.
But the U.S. crude drawdown was smaller than expected and the oil market remained extremely well supplied, analysts said.
“Crude stocks are still higher than last year’s stock levels … There is a long way to go before we arrive at five-year average stock levels,” said Sukrit Vijayakar, director of Trifecta energy consultancy.
A surplus of U.S. supply has led to large volumes of crude being exported from the United States to northern Asia, undermining the OPEC-led efforts to tighten the market.
The Organization of the Petroleum Exporting Countries and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2016, a deal likely to be extended until the end of March 2018.
Other producers have been quick to fill any supply gaps.
Shipping data in Thomson Reuters Eikon shows that U.S. crude exports to Asia have soared from a handful of tankers a quarter throughout 2015 and 2016 to 10 tankers in the first quarter of 2017 and that figure is expected to rise.
North Sea oil shipments to Asia have also been at record highs this year, with 19 tankers delivering in the first quarter and a similar amount expected to go to Asia in the second.
OPEC ministers meet in Vienna on May 25 to decide production policy for the next six months and are expected to prolong their agreement to limit production, perhaps by up to nine months.
UBS oil analyst Giovanni Staunovo said he saw a 60 percent probability of OPEC extending output cuts. That should help tighten the oil market and push up prices as demand rises gradually this year, he said.
“Capped OPEC/Russian production with stronger seasonal demand during summer sets the stage for oil prices to reach $60 a barrel over the coming months,” he said.
— CNBC’s Tom DiChristopher contributed to this report.