Prices on the other side of the Atlantic fell for a sixth session to just above a six-year low, keeping their discount to Brent at near $10, a trend that analysts say could deepen.

“The oil market is currently oversupplied, driven in part by the success of North American shale,” Morgan Stanley said.

While the U.S. rig count dropped to 1,125 last week from 1,809 rigs a year ago, past cycles have shown there is “often a lag between when drilling stops and when oil supply stops growing”, the bank said in a note.

Brent, which rose to a session high of $54.38, was trading at $53.59, down 35 cents, by 0407 DST. The April contract that expired in the previous session closed down $1.23 after hitting $52.50 earlier on Monday, its lowest since Feb. 2.

U.S. crude, or West Texas Intermediate (WTI), was at $43.41 a barrel, down 47 cents and slightly above 6-year lows of $42.85 marked on Monday.

“We expect WTI to remain under pressure as inventories swell further as the seasonal maintenance period begins. We expect this to remain the case in the short term,” ANZ bank said.

“Traders would be quite happy to see the spread go out to $15-20,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

“We have reached a real bifocal point for the market. We either enter a more bearish mood with a new low or it turns around and becomes a bit bullish,” he said.

Oil prices could rise slightly as the oil markets “come into balance” by the second half of the year, Ian Taylor, chief executive of oil trader Vitol [VITOLV.UL] said at a conference on Tuesday.

Traders are now waiting for data on U.S. crude inventories for price direction. A Reuters poll showed a likely build in stocks for a tenth week to a new record high.

The poll was released ahead of weekly reports from industry group the American Petroleum Institute (API) and from the U.S. Department of Energy’s Energy Information Administration.

The potential of a nuclear deal that could end sanctions against Iran, allowing Tehran to send more of its oil into the market, also dragged on oil markets.

(Source: Reuters)

Benchmark Brent oil had earlier ended up for the session, supported by a weaker dollar and short-covering, while U.S. crude closed down on bets that inventories hit record highs for a 10th straight week.

Industry group American Petroleum Institute (API) said after the market’s settlement that crude stockpiles rose by 10.5 million barrels in the week to March 13, far ahead of the 3.8 million forecast by analysts polled by Reuters. If correct, the API number would lift total U.S. inventories to 450 million barrels.

Official inventory data will be issued on Wednesday by the U.S. Energy Information Administration (EIA).

Market participants view the API’s number as a precursor to the EIA, although the two have often diverged.

Brent’s new front-month May contract traded as low as $53.15 a barrel by 4:43 p.m. EDT (2043 GMT) after the release of the API data. It had settled the session at $53.51, up 7 cents from Monday, when the previous front-month closed at $53.44.

U.S. crude’s front-month fell to as low as $42.61 a barrel post-settlement, down $1.27. It had settled the session 42 cents lower at $43.46.

Technical charts show brittle support for U.S. crude at above $40, suggesting it could fall to between $37 and $32, analysts have said.

Rising output in Libya, and Iran’s wish to export more oil if it clinches a nuclear deal that would remove Western sanctions, had also pressured crude prices on Tuesday.

“All indications are there’s too much oil in the United States, and it’s growing, and that should drive prices lower,” said Sal Umek at the Energy Management Institute in New York.

Brent rose earlier in the day after some market bears closed out their short positions and took profit on its drop of more than 7 percent in three earlier sessions.

The market’s downside was also limited by a weaker dollar to the euro that made commodities denominated in the greenback more appealing to holders of the single currency.

Adding to the day’s volatility was position squaring ahead of options expiry in U.S. crude, which resulted in “a little crazy action,” said Tariq Zahir, managing partner at Tyche Capital Advisors in Laurel Hollow in New York.

Brent’s premium to U.S. crude CL-LCO1=R, one of the biggest oil plays, narrowed to less than $9 a barrel, tripping up some traders who had bet the spread would expand this week after a recent 13-month high above $13.

Brent was pressured as the ECB started buying bonds under its quantitative easing program, a move that implies a certain level of deflation, said Bob Yawger at Mizuho Securities in New York.

U.S. crude was lifted after data from energy information provider Genscape suggested a smaller inventory build last week, compared with the previous week, at Cushing, Oklahoma, the delivery point for U.S. futures.

Genscape estimated a 157,000-barrel rise in Cushing last week, traders said, versus 536,000 barrels noted by the Energy Information Administration during the week ended Feb. 27.

“The perception is that the number will be smaller than it has been in the last week, and several weeks before that, particularly the number at Cushing won’t be one of these mega-builds,” Yawger said.

Brent LCOc1 settled down $1.20, or 2 percent, at $58.53 a barrel.

U.S. crude CLc1 finished up 39 cents, or 0.8 percent, at $50.

Traders said a U.S. executive order against OPEC member Venezuela and sanctions against certain individuals in that country also had a negative effect on Brent, although a senior Obama administration official said the order does not target the Venezuelan oil industry.

“On the face of it, this executive order should have been bullish if anything to oil, if it impedes oil moving of Venezuela in any way,” said Phil Flynn, analyst at Price Futures Group in Chicago. “But Venezuela is such a basket case that people tend to worry about so many other things concerning that country, and that’s possibly what caused the market to go down.”

U.S. crude imports from Venezuela have averaged 728,000 barrels per day since the start of last year, down from 738,000 bpd in 2013 and 890,000 bpd in 2012.

(Additional reporting by Christopher Johnson in London and Keith Wallis in Singapore; Editing by Jason Neely, William Hardy, David Evans, Tom Brown, Peter Galloway and Marguerita Choy)