"The report is very bearish given the large increases in refined product inventories, and even though the crude drawdown was close to expectations, it seemed to disappoint," said John Kilduff, partner at Again Capital LLC in New York.
Brent crude for October delivery was down more than $1 to near $98 a barrel, off for a fifth straight session. and within view of its weakest levels since April 2013. Brent prices are off by 15 percent since hitting a year high above $115 a barrel in June, with fast-rising U.S. output and the return of exports from Libya creating a market that looks increasingly over-supplied.
U.S. crude finished down $1.08 at $91.67 a barrel, the lowest since January 9.
Oil prices on both sides of the Atlantic have dropped over the past three months, dragged down by soaring U.S. shale oil production which has replaced many imports from West Africa, Europe and other regions.
Total production from members of the Organization of the Petroleum Exporting Countries rose last month despite Saudi Arabia saying it had cut output, according to the group's monthly market report on Wednesday. The OPEC report also cut the forecast for the expected demand for crude from the group by 160,000 barrels per day (bpd) in both 2014 and 2015.
The U.S. EIA said on Tuesday that U.S. output in August hit its highest level since 1986.
As prices have fallen due to higher production, traders and analysts have said that risks to supply from the Ukraine crisis and the difficult security situation in Iraq still remain.