Oil fell below $40 per barrel on Thursday, on track for the biggest weekly drop in two months, as stockpiles in the United States continued to grow while the dollar strengthened against major rivals.
Data from the U.S. Energy Information Administration (EIA) showed that crude stockpiles grew by 9.4 million barrels last week, which is three times more than previous forecasts.
The rise in U.S. stockpiles to record levels halted the sharp rebound in oil prices brought about by oil freeze deal reached among major oil producers, including Russia and Saudi Arabia.
Brent crude futures (LCOc1) gave up $0.85 to trade at $39.62 a barrel by 1130 GMT.
U.S. crude futures (CLc1) also fell on Thursday, shedding $0.84 at $38.95 a barrel.
Meanwhile, the dollar rose for the 5th straight day against a group of rival currencies on Thursday, putting it on course for its best winning streak in about a year, as investors flocked to the greenback after Fed officials hinted of more U.S. rate hikes this year
A stronger American currency makes oil, which is priced in dollars, less attractive to those holding competing currencies.
Major oil producers will be meeting next month in Qatar to finalize details of the previously announced production freeze. Representatives from 15 oil-producing countries have confirmed their participation.
In related news, most markets will be closed on Friday for the Easter holidays.