Investing.com - Oil prices fell sharply during European hours on Wednesday, as market players awaited fresh weekly information on U.S. stockpiles of crude and refined products.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 10:30AM ET (14:30GMT) amid expectations for a withdrawal of 455,000 barrels.
Gasoline inventories are expected to decline by 1.166 million barrels while stocks of distillates, which include heating oil and diesel, are forecast to rise by 400,000 barrels, according to analysts.
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories increased by a surprising 4.46 million barrels in the week ended August 19.
It also showed a drop of 2.1 million barrels in gasoline stocks, while distillates showed a draw of 800,000 barrels on the week.
Crude oil for October delivery on the New York Mercantile Exchange slumped 74 cents, or 1.54%, to trade at $47.36 a barrel by 3:48AM ET (07:48GMT), after rising 69 cents, or 1.46%, on Tuesday.
Meanwhile, on the ICE Futures Exchange in London, Brent oil for October delivery declined 60 cents, or 1.2%, to trade at $49.36 a barrel after climbing 80 cents, or 1.63%, in the prior session.
Oil's gains on Tuesday followed a Reuters report that said Iran was sending positive signals that it may support joint action to prop up the oil market. Iran was unwilling to participate in a deal last spring to freeze production.
OPEC is set to hold an informal meeting to again discuss an output freeze late next month.
Over the past two weeks, crude prices soared almost $10 a barrel, or nearly 25%, amid speculation major oil producers, led by Saudi Arabia and Russia, are reconsidering a collective production freeze in an effort to boost the market.
However, analysts and traders remain skeptical the meeting would result in a coherent effort to reduce the global glut.
An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative, underscoring the difficulty for political rivals to forge consensus.
Indications of an ongoing recovery in U.S. drilling activity also weighed. According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week increased by 10 to 406, the eighth consecutive weekly rise and the 11th increase in 12 weeks.
Some analysts have warned that the current rally in prices could be self-defeating, as it encourages U.S. shale producers to drill more, underlining concerns over a global supply glut.