Brent crude fell below $104 a barrel on Thursday as rising fuel supplies and faltering demand pointed to a growing surplus of oil worldwide.
U.S. crude oil inventories jumped to a fresh record last week as domestic production continued to climb, the U.S. Energy Information Administration (EIA) said on Wednesday.
The EIA forecasts global oil markets will be well supplied this year and next due to slowing demand and rapid increases in output, particularly from the United States.
World stock markets also cast a shadow over sentiment, falling back from record highs after China's annual consumer inflation rose by more than expected in April while factory prices fell for a 14th consecutive month.
Brent crude for June fell 50 cents to $103.84 per barrel by 1100 GMT. The benchmark has slipped from a one-month high of $105.94 touched on Tuesday after Israeli air strikes on Syria stoked supply fears.
U.S. oil slipped 35 cents to $96.27.
"Oil supply is improving and demand growth is not as rapid as expected," said Abhishek Deshpande, oil analyst at French bank Natixis.
Saudi Arabia increased crude oil output by 160,000 barrels per day (bpd) to 9.3 million bpd in April, industry sources said this week, adding to an already well-supplied global market.
"More Saudi oil puts a cap on oil prices," Deshpande said.
In its monthly report this week, the EIA cut its forecast for world oil demand growth this year by 70,000 bpd to 890,000 bpd, and reduced its 2014 estimate by 120,000 bpd to 1.21 million bpd.
It also forecast supplies from countries outside the Organization of the Petroleum Exporting Countries (OPEC) growing by 1.11 million bpd in 2013 and by 1.77 million next year.
The ample supply was highlighted on Wednesday by EIA data showing U.S. commercial stockpiles of crude hit 395.5 million barrels in the week to May 3, the highest level since the government agency began records in 1982.
But oil stocks at Cushing, Oklahoma, fell by 652,000 barrels to 49.15 million in the week ended May 3, the EIA data showed.
Expectations that further capacity utilisation could suck more oil out of the Midwest storage hub to U.S. refiners narrowed the difference between the U.S. crude, also called West Texas Intermediate or WTI, and Brent to around $7.70.
On Wednesday, the spread between the two benchmark crudes hit $7.58, the lowest since January 2011.
News that militants blew up a pipeline carrying Iraqi crude from the northern city of Kirkuk to Turkey's Mediterranean port of Ceyhan on Monday night, stopping the flow of oil, offered some support to oil. (Additional reporting by Manash Goswami in Singapore; Editing by Alison Birrane) Word Count: 478