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US crude settles at $45.64, down 8 cents, falling for second day on supply concern

Oil prices fell for a second day in volatile trade on Thursday, after hitting one-month lows following an unexpected surge in U.S. inventories and the return of more Nigerian crude to the market.

U.S. crude futures ended Thursday's session 8 cents lower at $45.64 a barrel. They earlier fell as low as $45.20, the weakest level since the contract crashed through a number of key technical levels to $43.76 on May 5.

Brent crude was down 15 cents at $47.91 a barrel by 2:36 p.m. ET (1836 GMT), after striking a session low of $47.56.

On Wednesday, U.S crude prices fell five percent after data showed big increases in U.S. inventories of crude oil and gasoline last week as refinery runs declined and exports fell.

"The inventory data was surprising to everyone, both in crude and in refined products," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

In a note, Commerzbank said, "Unless data are released that make the latest inventory build appear an anomaly, oil prices are hardly likely to make any lasting recovery."

Partially offsetting the stockpiles data, U.S. crude production fell to 9.318 million barrels per day, the first drop in four weeks, according to the Energy Information Administration.

Oil prices have slipped below $50 a barrel despite a pledge by the world's largest exporters to extend an existing cut in production of 1.8 million barrels per day (bpd) into next year in an effort to reduce bulging global inventories.

Adding to concerns about supply outstripping demand, Royal Dutch Shell on Wednesday lifted a force majeure on exports of Nigeria's Forcados crude, bringing all the country's crude grades fully online for the first time in 16 months.

The market has also come under pressure from news of rising output from Libya, which together with Nigeria is exempt from the production cut made by the Organization of the Petroleum Exporting Countries and its 11 partners.

"I've been quite bullish for the second half of this year, based on supply and demand balances and I would still not give up on that idea, that rebalancing is going to start in the second half," PVM Oil Associates strategist Tamas Varga said.

"But if Nigerian and Libyan production is picking up as well as they are now, then slowly, I am probably going to have to start changing my mind."

On Thursday the Former F.B.I. director James B. Comey delivered senate testimony about the U.S. President and an investigation into Russian interference with the U.S. election. Haworth said the hearing was distracting U.S. players from the market.

Today the prices are more quiet and a lot of people are focused on a lot of other things that probably wont drive these prices," said Haworth.

Thursday's trading volumes for WTI were down about 84 percent from the same time on Wednesday.

— CNBC's Tom DiChristopher contributed to this story.