Oil prices fell more than 1.5 per cent on Thursday, as a bruising day on Wall Street bolstered fears of slowing demand amid lingering concerns over a global oversupply of crude.
U.S. West Texas Intermediate crude settled down 97 cents or 1.96 per cent to $48.59 a barrel. Brent crude futures were down 80 cents or 1.52 per cent to $51.90 a barrel.
U.S. stock indexes fell sharply on Thursday, with the Dow and the Nasdaq posting triple-digit point declines, as investors fretted over escalating tensions between the U.S. and North Korea.
The falling U.S. stock market translated to weakness in the oil market, said Phil Flynn, analyst at Price Futures Group in Chicago.
"That raised concerns about demand," he said, "The demand picture gets murky as stocks go down. Gold has stayed up so that confirms my suspicions it's a fear trade."
On the supply side, Russian oil producer Gazprom Neft considers it "economically feasible" to resume production in mature fields after a global agreement among OPEC and non-OPEC countries expires, a representative of the company said.
And while the Organization of the Petroleum Exporting Countries raised its outlook for oil demand in 2018 and cut its forecasts for output from rivals next year, yet another increase in the group's production suggested the market will remain in surplus despite efforts to limit supply.
OPEC said its oil output rose by 173,000 bpd in July to 32.87 million bpd, led by the exempt producers plus top exporter Saudi Arabia, citing figures it collects from secondary sources.
Crude prices are down nearly 7 per cent so far this year, pressured by concern that output cuts by OPEC and its partners may not eliminate the global crude glut.
"$50 seems to be a formidable foe for the crude bulls," said Flynn.
Global crude stocks remain above their longer-term averages and with the U.S. summer driving season nearly at an end, Wednesday EIA data showed gasoline inventories rose for the first time in eight weeks.
EIA data also showed inventories in the United States are at their lowest since October, having fallen for 10 of the last 12 weeks.
While prices rose on Wednesday after the lower U.S. inventory numbers, Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut said that information was not enough to sustain a rally.
"It seems like the market wants to go higher," he said, "The market is searching for it, the question is will it get it."