LONDON: Oil fell towards $108 per barrel on Wednesday pressured by an improving supply outlook with stocks in the United States expected to be at a record high and optimism about higher exports from Libya.
Analysts polled by Reuters expect US crude stocks to have risen by 2.4 million barrels to 400 million barrels last week, the highest level since the US Energy Information Administration started collecting data in 1982.
The EIA's weekly inventory data is due out at 1430 GMT.
Brent crude for June delivery was down 69 cents to $108.29 per barrel at 0826 GMT after climbing 86 cents to $108.98 in the previous session.
June US crude was down $1.07 cents at $100.21 per barrel, after falling as low as $100.10, heading for what could be its lowest close in four weeks.
A day earlier, US crude rose 44 cents to close at $101.28. "Crude oil stocks in the US are rising to their highest level in decades and that's weighing on the whole crude complex," said Bjarne Schieldrop, analyst at SEB in Oslo.
Schieldrop added that optimism about crude oil exports from Libya after ports re-opened in the North African country was a factor weighing on oil prices this week.
A second tanker is due to load at Libya's eastern Hariga port after it reopened under a deal between the government and rebels, an oil official said on Tuesday.
Libya lifted force majeure on Zueitina on Monday, paving the way to restart exports from that eastern port as well.
"It's more to do with optimism about higher exports than actual volume so far as Zueitina only has capacity to export 70,000 barrels per day," Schieldrop said.
Data from the American Petroleum Institute on Tuesday also painted a sturdy supply picture in the United States, as it showed that oil inventories rose 3 million barrels last week, higher than an increase of 2.4 million forecast by analysts.
EIA data, however, is the industry standard and more closely watched.
The European Union on Tuesday imposed further sanctions on Russia over the Ukraine crisis, freezing assets and issuing new visa bans on Russian officials and Ukrainian rebel leaders, while Russian President Vladimir Putin ruled out counter sanctions.
Investors were also watching developments over Iran after the US targeted a Chinese businessman and a Dubai-based entity for alleged offences related to violations of sanctions.
Also, a decision from the US Federal Reserve is due at 1800 GMT over whether to reduce its monthly bond purchases, a move which some analysts say would put pressure on oil prices.
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