Oil prices fell have fallen on news of a huge increase in US crude inventories and France's suggestion that it was ready to tap strategic reserves to ease high prices.
New York's main contract, West Texas Intermediate crude for delivery in May, finished at $US105.41 a barrel, down $US1.92 from Tuesday's closing level.
In London trade, Brent North Sea crude for May shed 38 US cents to settle at $US 124.16 a barrel.
The New York oil market sold off "after a pretty bearish report this morning from the Department of Energy," said James Williams at WTRG Economics.
The department said US crude oil inventories jumped by 7.1 million barrels last week - three times the amount expected.
The big build-up of stockpiles reignited concerns about slowing energy demand in the world's largest oil-consuming country.
"The prospect of a significant drop in demand in coming weeks remains a threat, particularly for petrol as fuel prices are at their highest since April 2011," said Nic Brown, a commodities analyst at Natixis.
The negative impact of high oil prices on the global economy has spurred speculation that the United States will resort to tapping its strategic oil reserves to boost supply.
France on Wednesday said it was ready to release some of its strategic oil reserves to help bring down prices.
France's Energy Minister Eric Besson said that "it was the United States that requested this and France greeted the idea favourably. We are now waiting for the opinion of the International Energy Agency."
Government spokeswoman and Budget Minister Valerie Pecresse said France was working with the United States and Britain to persuade the IEA to permit them to tap their reserves "to counter speculation on global energy markets."
WTRG Economics analyst Williams said that resorting to strategic reserves "really is not a solution" but just a temporary measure.
"Produce more crude oil or use less of it," he said, warning that tapping the reserves could mean "you don't have the crude oil to use in times of real emergency."