Oil prices saw their sharpest drop in two years, shedding more than $2 a barrel as mild US weather led consumers to use less petrol and heating oil.
Opec members are mixed over whether to cut supplies or not
US light crude oil fell $2.73 to $55.59 a barrel in New York, falling by over $5 in two days. In London meanwhile, Brent crude fell $2.85 to $55.11.
The US Energy Department said stocks of distillates rose by two million barrels in the last week of 2006.
The fall led oil group Opec to say it might act if prices continue dropping.
Demand for heating in the US is tipped to be 30% less than normal this week, according to forecasts by the National Weather Service.
Analysts said that exceptionally warm weather in the north-eastern US had led to lower demand in the world's largest oil consumer.
As well as the energy department data, the government released figures showing that petrol stocks rose by 5.6 million barrels in the last week of December - considerably higher than the 1.5 million barrels expected.
The price of oil has fallen sharply since peaking above $78 in July, despite Opec threatening to trim its output.
Analysts said that the outlook for commodities in general had become less favourable.
"The global macroeconomic outlook is not so bullish for commodities any more," said Frederic Lasserre of SG CIB Commodities.
Wednesday saw copper reach a nine-month low, falling below $6,000 a tonne, while tin and aluminium have also dropped.
"It looks like someone is making a strategic change in asset allocation, or making a move out of assets in an aggressive fashion," said Bill O'Grady at AG Edwards.