Oil tumbled 2 percent to near four-year lows on Tuesday in another volatile session as a meeting of Saudi Arabia and three other nations ahead of an OPEC summit ended with no deal to curb crude output.
Saudi Oil Minister Ali al-Naimi held talks with officials from Venezuela, Russia and Mexico in Vienna before Thursday's summit of the Organization of the Petroleum Exporting Countries.
Crude prices have dropped roughly 30 percent since June, and some oil producers are pressuring OPEC to cut production. Tuesday's pre-summit meeting ended with no sign of an accord, prompting prices to dive.
A Wall Street Journal report that OPEC members were edging toward a compromise aimed at adhering to previously agreed production limits sparked a brief rebound before the losses deepened.
"It's pretty clear from today's meeting that the Saudis don't want a cut, and there's not going to be one," said John Kilduff, partner at New York energy hedge fund Again Capital.
Predictions for the OPEC summit range from a large output cut to none at all, and heavyweight Saudi Arabia has kept the market guessing as to what it will do.
Benchmark Brent crude settled down $1.35 at $78.33, falling from an intraday high of $80.44.
U.S. crude finished down $1.69 at $74.09. It fell more than $2 in post-settlement trade, reaching $73.71, near a four-year low of $73.25 hit a little more than a week ago.
Losses were exacerbated by a report from U.S. industry group American Petroleum Institute showing domestic crude inventories rose almost 3 million barrels last week, about six times more than analysts expected.
"The market's all over the place with the headlines we're getting today," said Tariq Zahir, managing member of Tyche Capital Advisors in New York.
"The reality is OPEC needs a cut of no less than 2 million barrels per day to clear the oversupply in the market, and they need to hold that down if they really want to see prices recover."
Even with an agreement to lower output, compliance might be tough, traders said.
"I think there's lot of skepticism that if OPEC were to announce a cut of 500,000 bpd or more, whether they would cheat their way beyond their words," said Andy Lipow at Lipow Oil Associates in Houston.
(By Barani Krishnan; Additional reporting by Ahmed Aboulenein and Jack Stubbs in London and Henning Gloystein in Singapore; Editing by Susan Thomas, Jason Neely, Chizu Nomiyama, Marguerita Choy, Peter Galloway, Jessica Resnick-Ault and Lisa Von Ahn)