McGillian expects to see oil drop next to the $37.75-per-barrel level, and if it breaks that, the next stop could be in the low $30s. "We all know the next level below (that) is the Great Recession low of around $32," he said.
The Energy Information Administration reported Wednesday that crude stocks rose by 252,000 barrels, lower than the 2 million forecast by analysts but it was still seen as a negative since supplies should be dropping at this time of year. The EIA said it was the eighth straight weekly build, to 487.3 million barrels, just under the record 490.9 million barrels in April.
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"We should normally in November until January be in a drawdown period for crude oil inventories, and that has not been the case in the last four weeks," said Mike Dragosits, senior commodities analyst at TD Securities. "We continue to see builds. As we go forward, we're going to start to see some of the petroleum products building, gasoline, distillates and if we have crude oil inventories not declining, even building, we're going to stay in a record oversupply situation."
U.S. production last week totaled 9.182 million barrels a day, slightly lower than the 9.185 million in the week earlier. U.S. imports of commercial crude totaled nearly 7 million barrels a day, down from 7.4 million barrels a day the week earlier.
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"We have a situation where global inventories are incredibly high and even though the rigs are coming down, U.S. production maintained its levels from last week," said Dragosits. "Next year, we expect that to come off, but for now it's certainly painting a bearish picture and that's why we have crude under $40 on the December contract."
Oil lost 8 percent last week alone, and held some gains early this week after the terrorist attacks in Paris put the spotlight on the Middle East and Syria. "I think we saw a little bit trying to be priced in but you continue to see weak fundamentals," said McGillian.
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"You have to remember the fighting has been going on in Syria and Iraq for a long time," he said.
Dragosits said another negative for oil was the repeated claim by Iran that it will put 500,000 barrels a day on the market as soon as sanctions are lifted, and another 500,000 six months later.
Gasoline futures were initially higher on the EIA report, but lost some gains. Stockpiles rose by 1 million barrels after a series of declines. But analysts note that demand is still running more than 9 million barrels a day, a strong number for this time of year.
"Demand continues to be good and the national average is about  cents lower per gallon than this time last year," said Andrew Lipow, president of Lipow Oil Associates.
Dragosits points out the December contract expires Friday, and WTI futures for January were trading higher at $41.50 in Wednesday afternoon trading.
He said the supply data continues to pressure prices. "If the trend continues throughout the winter, it's going to be quite bearish for crude oil," Dragosits said.
Lipow said he expects oil to reach the August low of $37.75 but not immediately. "$40 was a pretty important level. I think it could stay around that level for awhile," he said.
The stockpiling of U.S. crude has been increasingly a concern for the market, which has been obsessing about the amount of oil in storage. The International Energy Agency reported last week that a record 3 billion barrels of crude are stockpiled globally.