Global benchmark Brent crude futures fell 11 cents, trading at $55.25 a barrel, while Brent touched $54.76 intraday, its lowest since April 7.
Increasing U.S. output is undermining attempts by the Organization of the Petroleum Exporting Countries and other major oil producers to curb output and sustain a price rally in a market that has been oversupplied since mid-2014.
But bloated inventories weighed.
United States gasoline stocks posted a counter-seasonal build of 1.5 million barrels, because of rising refining activity.
United States commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 1 million barrels from the previous week, the Energy Information Administration (EIA) said in its Weekly Petroleum Status Report.
Under the deal, OPEC is curbing its output by about 1.2 million barrels per day from January 1 for six months in an attempt to eradicate a supply glut.
US crude for May expires Thursday, and traders are dumping their oil contracts ahead of that, one analyst also noted.
Overall, global fuel markets remain bloated, and Saudi Arabian Energy Minister Khalid al-Falih was quoted on Thursday in an interview with the Saudi-owned al-Hayat newspaper that supplies remained elevated in part because traders were selling supplies out of tanker storage.
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However, Saudi production rose to 10 million bpd in February, up from 9.75 million bpd the previous month, the Jodi data showed, as domestic refiners processed more crude oil.
US production trends come as members of the Organization and Petroleum Exporting Countries gear up for May meetings to consider extending a production deal meant to bring the energy market back to balance.
OPEC agreed to cut output by 1.2 million barrels a day for the first six months of 2017, while 11 other non-OPEC countries including Russian Federation agreed to limit supply.
The agreement in Vienna was created to speed the end of the worst oil downturn in a generation by mopping up excess supplies and boost prices, providing some relief to resource-rich nations whose economies have taken a big hit.
Oil prices fell to a two-week low amid concerns that the global supply is far too high, and if the downward trend isn't bucked crude could decline for the third day in a row.
The market will watch Wednesday morning to see if US government data confirms the API report.
The API data will be followed by the EIA's (US Energy Information Administration) weekly inventory report tomorrow morning. A lifting of certain sanctions against Iran in late 2015 allowed Tehran to more than double its crude exports over 2016.
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