Oil prices fell for a third straight session on Thursday, snapping key technical support after growing talk of a release of strategic petroleum reserves (SPR) by consumer nations spurred profit-taking.
Even with the day's losses for both contracts, Brent crude futures remained on pace to post a 14 percent gain for the quarter, with U.S. crude on track for a 4 percent rise.
Traders took profits from oil's bull run as the United States, Britain and France consider releasing emergency stockpiles in hopes of bringing down high fuel prices that have caused economic and political fallout.
Economic concerns mounted after data showed a higher-than-expected number of Americans filed U.S. jobless claims, weighing on stock and crude markets.
"I think part of it is today's economic data," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago. "I think traders are very sensitive to booking profits to have that 1 to 2 percent gain for the month."
"We've been talking about the SPR here, France and the UK, that could be weighing on some investors."
Losses accelerated after U.S. crude broke through its 50-day moving average in afternoon trade, dragging down prices for international benchmark Brent as well.
Brent crude futures fell $1.77 to settle at $122.39 a barrel, extending losses after dropping 1.09 percent the previous session.
U.S. crude futures lost $2.63 to settle at $102.78 a barrel, having dropped 1.8 percent o n W ednesday and marking the biggest two-day slide since mid-December. Brent's premium to U.S. crude <CL-LCO1=R> increased to $19.61 a barrel, based on settlements.
Front-month April RBOB gasoline showed some resilience ahead of Friday's contract expiry, managing a 0.51 cent rise to settle at $3.4006 a gallon.
In contrast, April heating oil fell 1.53 percent, nearly 5 cents.
Brent and U.S. crude trading volumes were both just above half a million lots, leaving Brent nudging 0.2 percent over its 30-day average. U.S. dealings were 14 percent below its 30-day average in post-settlement trading.
Despite the run-up in prices this year, oil volatility has dropped to the lowest level in five years this month, suggesting that demand for protection against risks including an abrupt loss of Iranian supplies, a dramatic drop in demand or a release of emergency reserves has waned.
In addition to the United States, Britain and France, other countries including South Korea and Japan may join the reserves plan, which comes after prices jumped 15 percent since December.
French Prime Minister Francois Fillon said he believes there is a good chance of a U.S.-Europe accord on a release of strategic oil reserves.
The impact on Iranian supplies from U.S. and EU sanctions aimed at halting Tehran's nuclear program, an accident in the North Sea and reported attacks on oil-producing areas in South Sudan this week have contributed to the price rise.
The increase in oil prices drew a rare opinion piece in the Financial Times o n Wednesday from Saudi Arabia's oil minister Ali al-Naimi, in which he reiterated comments from last week that the market was well supplied and reassured that the OPEC kingpin would meet any supply loss.
Consumer nations may seek reassurance from Saudi Arabia that it will not cut oil production and neutralise the impact on oil prices if they tap emergency reserves, industry and diplomatic sources said.
Last year after the International Energy Agency tapped reserves at the end of June to fill the gap left by Libya's civil war, Saudi output at first remained high, and then fell.
Some members of the IEA have argued against the need for another coordinated effort by the agency, although it said in a statement it was ready to respond if market conditions warrant action.
"The oil market has been tightening in recent months," the IEA said in a statement from its Executive Director Maria van der Hoeven. "The International Energy Agency, like many others, is concerned by the impact of these high prices while the global economic recovery remains fragile."