Oil prices closed lower Tuesday on expectations of a 10th week of record builds in U.S. crude, although a weaker dollar limited the market's downside.
Traders and investors have forecast that crude stocks in the United States rose last week to above 452 million barrels, a Reuters poll showed. That would be the biggest domestic stockpile in at least 80 years.
The American Petroleum Institute, an industry group, will issue its weekly inventory report at 4:30 p.m. EDT (2030 GMT), two hours after the market's close and ahead of Wednesday's official data from the U.S. Energy Information Administration.
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Also pressuring prices was rising output in Libya and Iran's eagerness to export more oil once it clinches a nuclear deal removing Western sanctions, traders said.
The slide in crude prices was limited by a weaker dollar that made commodities denominated in the greenback more appealing to holders of other currencies. The dollar paused on Tuesday in its march toward parity with euro, weakening almost half a percent against the single currency.
Position squaring ahead of the expiry of options in U.S. crude added volatility to the market.
"You're getting a little crazy action today because options are expiring," said Tariq Zahir, managing partner at Tyche Capital Advisors in Laurel Hollow in New York.
U.S. crude, or West Texas Intermediate, settled down 42 cents, at $43.46 a barrel, the lowest since March 2009.
Brent oil slipped almost 50 cents to $53.50 a barrel.
Brent last closed higher on March 11. Since then it has lost more than 7 percent, and traders believe it will break below $50.
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"OPEC members are still staunchly producing...and demand from Europe and China are really struggling to pick up," said Kash Kamal, senior research analyst with Sucden Financial. "The overall tone is quite bearish."
Kamal said any suggestion from the U.S. Federal Reserve, which will begin their two-day meeting later today, that they are moving toward their first interest rate rise in a decade could underpin crude prices, as it would suggest optimism from the Fed on the U.S. economy.
Others also see the possibility for markets to stabilise or even rise, with Vitol Chief Executive Ian Taylor telling a conference on Tuesday that oil markets would "come into balance" by the second half of the year.
However the potential of a nuclear deal that could end sanctions against Iran, allowing Tehran to send more of its oil into the market, also dragged on oil markets.
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Commerzbank said that if an agreement is reached, up to 1 million barrels per day of additional oil from Iran could reach the market in the second half of the year.
"When people look at the market now, they are looking at the possibility of an Iran resolution," Bjarne Schieldrop, chief commodities analyst with SEB in Oslo.