Crude inventories in the United States, the world's largest petroleum producer, rose 2.6 million barrels last week, the US Energy Information Administration said. Analysts polled by Reuters had expected a draw of 2.5 million barrels.

China could be facing peak coal demand for the first time ever as a cooling economy hit consumption, paving the way for India to emerge as the main driver of global coal use by 2020.

Open interest in Brent call options tied to strike prices from $50 to $80 per barrel has climbed steeply in recent weeks, indicating prices will stage a strong recovery from current levels.

Oil traders are preparing for another downward turn as Iran's resurgent crude exports hit global markets after sanctions are ended.

The outlook remains bleak as traders ditch positions and producers hedge against lower prices despite some analysts saying market oversupply may have been overstated.

Monday's falls came after gains made last week following a further decline in the US oil rig count which indicated that domestic crude production could drop in coming months.

Japanese manufacturers' confidence fell in September to an eight-month low and is forecast to worsen further as fears of a China-led global economic slowdown grow, a Reuters poll showed.

Front-month Brent crude futures were down 37 cents at $47.77 per barrel at 11:05 am. US crude futures dipped 6 cents to $44.57.

The Brent global crude benchmark was trading at $49.84 per barrel at 0616 GMT, 32 cents up from its last settlement after jumping 4 per cent in the previous session.

In China, the world's top consumer of energy and commodities, crude oil imports fell 13.4 per cent in August to 26.59 million tonnes from the previous month, although underlying demand remains strong.

US West Texas Intermediate (WTI) crude oil slumped over 4 per cent on Wednesday to hit a 6-1/2-year low as a huge unexpected stockpile build in the United States reinforced concerns about a growing global oil glut.

The prices were hit by soaring production and a slowdown in global buying, including from India and China which until recently have been pillars of strong demand.

Japan's economy, the second biggest in Asia and No. 3 in the world, shrank in the second quarter from a year earlier, adding to fears that slowdowns in Asia's biggest economies will weigh on oil demand.

Analysts said they expected China's government to intervene further to stimulate growth as its industrial output growth continued to slow.

Asian consumption of fuels has beaten expectations due to demand stemming from structural changes in the economies of Asia's biggest oil users, vindicating for now OPEC's decision six months ago to keep its taps open.

Oil prices jumped after US inventories built up more slowly than expected and talks between major oil producers this week triggered speculation of production cuts.

The US Energy Information Administration expects US shale production to fall by 45,000 barrels to 4.98 million barrels per day in May from April.

Front-month Brent crude futures were trading up 13 cents a $58 a barrel by 12:19 am, while US crude had also risen 13 cents to $51.77.

The fall came after oil prices jumped more than 5 per cent on Monday as traders reassessed how quickly Iran might increase exports after a preliminary nuclear deal.

Iran and world powers are trying to reach an agreement in nuclear negotiations by a Tuesday deadline.