International Brent crude futures were at $43.72 a barrel, down 33 cents, or 0.8%.

Oil fell sharply after data from the US Energy Information Administration showed crude inventories rose 1.1 million barrels in the week ended 5 August. Analysts polled by Reuters had expected a 1 million-barrel crude draw instead.

"Crude oil stocks rose 1.06 million barrels to 523.6 million barrels. The unexpected rise was driven by reduced operating rates at refineries, which fell 1.1% to 92.2% of capacity," ANZ bank said on Thursday.

"Bearish supply-side news also weighed on the market, with Saudi Arabia reporting a record 10.67 million barrels per day production in July," it added.

However, other analysts said that this was not necessarily a bearish market signal as Saudi's record output would be met by strong demand and supply disruptions elsewhere.