LONDON (Reuters) - Oil prices dropped more than $2 toward $66 a barrel and were on track to fall nearly 7 percent this week as a surprise jump in U.S. crude and product stocks stirred doubts that prices may have run ahead of demand fundamentals.
U.S. crude for November delivery fell $2.12 to $66.85 a barrel by 1409 GMT after falling below the key technical support level of $68 a barrel.
London Brent crude fell $1.99 to $66.00 a barrel.
The U.S. Energy Information Administration's weekly data showed on Wednesday that commercial stockpiles of crude gained 2.8 million barrels against analyst expectations for a 1.5 million barrel fall.
Inventories of gasoline and distillate stocks also rose sharply, fuelling concerns that demand in the world's largest oil consumer is still fragile.
"The very, very surprising build in all major products and crude is still on the minds of most people and that has more of an impact than the dollar," said Andy Sommer, an analyst with EGL in Switzerland.
The dollar softened on Thursday after the Federal Reserve reiterated its promise to hold interest rates very low for a long time but this had no impact on oil prices.
Oil prices typically rise when the dollar falls as investors buy dollar-denominated commodities such as oil as a hedge.
News that claims for jobless benefits fell unexpectedly by 21,000 last week did little to slow price falls.
Analysts said that investors were instead focused on oil demand fundamentals.
Oil prices have been rangebound between $65-$75 a barrel since the start of August and many analysts feel some convincing evidence of a recovery is needed to justify a push back up toward the top of this range.
