Oil prices fell heavily again on Thursday bringing losses so far this month to 10 per cent as US crude supplies showed a surprisingly strong recovery from record lows and US forces advanced on Baghdad.
US light crude dropped 81 cents, or 2.8 per cent, to $27.75 a barrel. So far in April, crude has fallen $3.30 as fears have eased of possible prolonged disruptions to global supplies.
London's Brent crude traded down 61 cents to $24.60 a barrel.
Latest bearish sentiment was fuelled by a big jump in US crude inventories, which grew by 6.8 million barrels last week, by far outpacing forecasts of a 2.75 million barrel rise.
The Energy Information Administration, the statistical arm of the US Department of Energy, reported on Wednesday that crude stocks rose to 280.7 million barrels in the week to March 28 as imports reached 10.4 million barrels per day, the largest average on record.
Stocks of gasoline increased 1.7 million barrels to 200.7 million barrels against expectations of a 700,000-barrel rise. Refiners usually build gasoline stocks at this time of year in preparation for peak summer demand.
The rises still left tanks at a deficit to year-ago levels, with crude down by more than 50 million barrels and gasoline off by 13 million barrels.
"Underlying supply/demand pressures in the global oil balance do not support the notion of prices falling much from today's levels," Merrill Lynch's Michael Rothman said in a note.
"Storage remains well below normal levels and that deficit is expected by us to persist into the back half of the year, and OPEC's spare capacity remains limited."