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 Coming amid anxiety about the U.S. economy and concerns that demand for oil and gasoline is falling, the inventory report reinforced a growing view that oil and petroleum product supplies are adequate.
Light, sweet crude for March delivery fell 15 cents to $86.99 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract fell $1.27 to settle at $87.14 a barrel in Wednesday's floor session.
In its weekly inventory report, the U.S. Energy Department's Energy Information Administration said crude oil inventories jumped 7 million barrels last week, nearly triple the 2.6 million barrel increase that analysts surveyed by Dow Jones Newswires had expected.
Gasoline stocks grew 3.6 million barrels last week, double the 1.8 million barrel estimate. Inventories of distillates, which include heating oil and diesel fuel, rose 100,000 barrels, countering analyst expectations that supplies would fall 1.8 million barrels.
"The major figures were all bearish," Citigroup analyst Tim Evans said in a research note.
As stocks grew last week, demand for gasoline fell 2.4 percent compared with the same week last year. Analysts see the decline as a sign that high prices are hurting demand.
Stock markets also continued to pressure oil prices, with the Dow Jones industrial average dropping for the third straight session on Wednesday, falling 0.5 percent to 12,200 points. The index has lost more than 4 percent this week.
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 In Asia
-- where many major exchanges have shut for the Lunar New Year holiday
-- the Nikkei 225 index on the region's largest bourse in Tokyo dropped 0.8 percent to 12,995 points by the end of morning trading.
Energy investors often view equity markets as a barometer of economic health, worrying that any slowdown in growth will lead to a corresponding slump in energy demand.
Keeping a floor under oil prices was Royal Dutch Shell PLC's decision to declare "force majeure" at one of its crude oil export facilities in Nigeria. The legal declaration means the company can't fulfill contractual obligations to deliver its customers 130,000 barrels of light crude a day through March due to rebel attacks in Africa's largest oil producing nation, a spokeswoman said.
March Brent crude fell 3 cents to $87.75 a barrel on the ICE Futures exchange in London.
Nymex heating oil futures fell 0.18 cent to $2.417 a gallon while gasoline prices dropped 0.74 cent to $2.2325 a gallon. November natural gas futures rose 3.5 cents to $8.029 per 1,000 cubic feet.
[Associated Press]
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