Another surprise rise in US stockpiles pushed the price of Brent crude below $48 this afternoon.
The global benchmark slid 2.46 per cent in afternoon trading to $47.18, while the price of West Texas Intermediate was down 2.91 per cent to $45.
The US Energy Information Administration (EIA) said this afternoon that crude stockpiles had risen for a second straight week, up by 2.3m barrels, compared with forecasts of a rise of 921,000 barrels.
Distillate stockpiles, including diesel and heating oil, jumped by 1.5m barrels against expectations of a 157,000 barrel fall.
Yesterday, data from the American Petroleum Institute showed US crude stocks rose by 942,000 barrels to 525.5m barrels in the week to 26 August.
The increases in US oil holdings has put fresh pressure on prices, after surprise increases in US domestic crude supplies and boosts to production from countries including Iraq and Nigeria already reinvigorated worries about a global supply glut last week.
Prices had rallied by more than 20 per cent from the beginning of August on hopes that producers were reviving talks on a possible output freeze.
Earlier in the day, pressure from a strong dollar also weighed on prices.
The US dollar index touched 96.143 yesterday, its highest since 9 August, and the currency continued to edge higher against the Japanese yen this morning, reaching 103.157 in early trading.
The currency was also boosted by odds rising that the Federal Reserve will raise interest rates before the end of the year, after personal consumption data released yesterday did not weaken in July, as analysts had forecast.
A stronger dollar tends to make dollar-denominated commodities, such as oil, more expensive for holders of other currencies.
"As well as several fundamental developments that suggest that the supply overhand in the oil market continues to persist, a rise in the US dollar has also weighed on the price of crude," said David Cheetham, market analyst at XTB.
"Rising expectations for Fed hikes this year has seen the greenback appreciate, with the USD-JPY reaching its highest level of August this morning."