Crude oil stocks rose by 6.7 million barrels, the U.S. Energy Information Administration said, more than the 900,000-barrel increase analysts expected. Gasoline and distillate stocks also rose.

"This is a very bearish report. Crude stocks are up due to higher imports," said Tom Knight, a trader at Truman Arnold in Texas. "The build in products is also bearish."

U.S. crude for February delivery was down $4.66 at $43.92 by 1:02 p.m. EST, while London Brent fell $3.52 to $47.01.

Oil demand in the United States, as well as Europe and Asia, has been eroded by the global economic slowdown. Total oil products demand in the U.S. in the past four weeks was down 2.9 percent from a year ago, the EIA said.

Cold weather and an escalation in the Ukraine-Russia dispute that has choked off gas supplies and increased demand for refined oil products were supporting prices earlier in the session.

Russian gas supplies to Europe through Ukraine shut down completely on Wednesday, leaving growing numbers of European Union member states without Russian fuel in freezing mid-winter temperatures.

The dispute has increased demand for gas oil, offering support to crude. It echoes a similar row three years ago that raised questions about Russia's reliability as an energy exporter.

Oil has risen nearly 50 percent from a low of $32.40 on December 19 as Israel's incursion into Gaza and the Russia-Ukraine row raised concern about supply disruptions, and OPEC output cuts threatened to tighten supplies.

While the Gaza conflict does not directly threaten any oil supplies, unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.

(Reporting by Alex Lawler, Editing by William Hardy)