Oil prices fell $4 to a six-week low Wednesday after a U.S. government report reinforced concerns high prices and economic turmoil were slashing into the nation's energy demand.
The slide extends oil's losses to more than $20 from the all-time peak above $147 a barrel hit July 11—the steepest drop in dollar terms in the market's history.
"The deteriorating demand picture reinforces our belief that oil prices are approaching a tipping point," investment bank Lehman Brothers said in a research note.
U.S. crude oil fell $3.98 to settle at $124.44 a barrel after touching a low of $124.30. London Brent crude fell $4.11 to $125.44 a barrel.
The losses came after the U.S. Energy Information Administration released a report showing a surprisingly large increase in domestic gasoline stockpiles last week, accompanied by weak implied demand.
"The big build on products in the EIA (report) is bringing the market down. Demand remains very poor for gasoline and distillates," said Phil Flynn, an energy analyst at Alaron Trading in Chicago.
The EIA report also showed a decline in nationwide crude stockpiles as imports slumped.
Adding to downward pressure on crude prices, Hurricane Dolly was not expected to cause any lasting disruptions to oil production from the Gulf of Mexico.
As of Tuesday morning, oil companies had shut about 5 percent of the region's oil and natural gas output as a precaution, although some of the production was already returning to service by Wednesday.
Dolly was expected to make landfall in Texas near the Mexico border later Wednesday.
Despite oil's recent losses, the market remains up more than 25 percent this year and more than six-fold higher since 2002, driven in part by growth in demand from China and other developing economies.