Oil prices fell more than 3 percent after government data showed that U.S. crude stockpiles unexpectedly rose in the last week, though not by as much as an earlier industry report indicated.
Inventories of U.S. commercial crude jumped by 2.6 million barrels in the week through Dec. 25, according to the Energy Information Administration.
A Reuters poll of nine analysts estimated that crude stocks fell 2.5 million barrels. The American Petroleum Institute, an industry group, on Tuesday reported a 2.9 million barrel build-up in U.S. stocks.
Front-month U.S. West Texas Intermediate crude futures settled down 3.35 percent, or $1.27, at $36.60 a barrel. Brent was down $1.34, or 3.5 percent, at $36.44 a barrel.
Crude stocks at the Cushing, Oklahoma, delivery hub increased by 892,000 barrels to a record, EIA said.
Gasoline stocks rose by 925,000 barrels, compared with analysts' expectations in a Reuters poll for a 896,000-barrel gain. Distillate stockpiles, which include diesel and heating oil, were up by 1.8 million barrels, versus expectations for a 1.0 million-barrel increase, the EIA data showed.
Brent crude oil earlier retreated toward 11-year lows on Wednesday as indications of slowing global energy demand bumped up against record-high inventories.
Benchmark Brent, near $37 per barrel, traded less than $1 away from those lows reached last week as the primary supportive factor — an expected cold snap in Europe and the United States — was forecast to be short-lived.
"There is no significant improvement in the prompt fundamentals," said Olivier Jakob, managing director of PetroMatrix. He warned that low traded volumes into the new year made flat prices susceptible to sharp movements.
Crude prices have plunged by two-thirds since mid-2014 as soaring output from OPEC, Russia and the United States created a global surplus of between half a million and 2 million barrels per day.
Oil exports from southern Iraq, at 3.27 million barrels per day so far in December, held near a record, cementing its role as the fastest source of supply growth in 2015.
Slowing demand growth, particularly in Asia, has also weighed on prices. China's energy consumption growth in 2015 was its lowest since 1998, according to official news agency Xinhua.
Fuel subsidy cuts in oil kingpin Saudi Arabia aimed at helping it survive the price rout could also slow the country's own demand growth next year.
Saudi Arabian Oil Minister Ali al-Naimi said the kingdom, the world's top crude exporter, does not limit its output and has the capacity to meet additional demand, state television Al Ekhbariya reported on Wednesday.
"I think they got sick and tired of — earlier in the decade — losing market share," Kyle Cooper, managing director at Criterion Research, told CNBC's "Power Lunch" on Wednesday. "This has been their mantra for quite a while. I think they vastly underestimated the significance of the oil shale here in the U.S. I think they kind of thought it was a bluff."
On Wednesday, International Monetary Fund chief Christine Lagarde warned that global economic growth would be "disappointing" in 2016, with the prospect of rising U.S. interest rates and a slowdown in China contributing to a higher risk of vulnerability.
Forecasts that a cold spell in Europe would not last long also undercut price support that had helped U.S. crude and Brent rally by around 3 percent in the previous session.
For most of the United States, a brief cold period is also not expected to continue much more than a week.
"The weather has been so much above normal that ... it will take a lot of colder temperatures to really reverse the overhang," Jakob said.