Brent crude prices fell to a three-week low on Thursday, pressured by weak euro zone economic data and the possibility that the U.S. Federal Reserve might curb its economic stimulus measures.
Thursday's slide for both Brent and U.S. crude came after Brent's largest one-day fall in 2013 on Wednesday, as metals and equities also retreated after recent rallies.
"Yesterday was a major sell-off, not just in oil but in other commodities," said Tony Machacek, a broker at Jefferies Bache in London.
Oil, equities and the euro were further pressured on Thursday as surveys showed that a downturn in the euro zone's businesses worsened unexpectedly in February.
Economists had expected that the euro zone purchasing managers' indexes (PMIs) would support tentative signs a recovery was under way, but instead they pointed to a first-quarter contraction of up to 0.3 percent.
Brent April crude was down $1.75 at $113.85 a barrel at 1:01 p.m. EST (1801 GMT), after slipping to $113.32 during the session, Brent's lowest price since Jan. 29.
U.S. April crude was down $2.22 at $93 a barrel, after falling to $92.63, the lowest front-month price since Jan. 7, having dropped below the 50-day moving average of $93.32.
It was the first drop below its 50-day moving average since mid-December.
The U.S. March contract expired and went off the board on Wednesday.
Since mid-December, hedge funds and other large speculators have nearly doubled their bets that oil prices would rise, amassing positions in Brent and U.S. crude futures and options equivalent to around 440 million barrels of oil, regulatory and exchange data show.
The price of Brent rose by $10 a barrel in the first six weeks of 2013 to hit a nine-month high above $119 on Feb. 8 as signs of strong demand from China and lower Saudi supply raised expectations of a tighter market.
"Brent was overbought amid overwhelming investor interest, an increased geopolitical premium and bullish macro sentiment, while short-term fundamentals simply do not justify sustained gains past $120," said Andrey Kryuchenkov, an analyst at VTB Capital in London.
Crude futures initially pared losses after data showed U.S. refined fuel inventories fell more than expected in the week to Feb. 15. The U.S. Energy Information Administration's weekly report also showed crude inventories rose as refineries processed less oil and imports rose.
Adding to the cautious outlook for the global economy, the U.S. Labor Department said on Thursday initial jobless claims increased and the Philadelphia Federal Reserve's business activity index fell in February for a second month.
The weak U.S. data might be ammunition for those on the Federal Open Market Committee who support continuing the Fed's stimulus program to boost the economy.
On Wednesday, minutes of the Fed's most recent policy meeting cast doubt over how much longer the central bank would stick to its stimulus plan, helping pressure the euro, equities and commodities.
Crude prices had earlier felt pressure after Tuesday's report that oil industry sources said Saudi Arabia, which cut supplies in the last two months of 2012, could raise its output in the second quarter to satisfy higher demand.
Investors also assessed the prospect of reduced tension between Iran and the West over Tehran's nuclear work. A Western diplomat said on Wednesday major powers were ready to make "a substantial and serious offer" to Iran during talks next week. (Reporting by Robert Gibbons in New York, Alex Lawler in London and Florence Tan in Singapore; Editing by Bernadette Baum)