Brent crude was at $49.19 per barrel at 1116 GMT, down 70 cents. It earlier fell more than $1 to the day's low of $48.86. U.S. crude futures were down 74 cents at $48.36 a barrel.
Gulf OPEC members including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets on Thursday, a senior OPEC source said.
Oil trimmed some earlier losses after the source spoke.
Iran signalled it was not ready for any such deal and analysts said it was more likely that OPEC members would continue to focus on defending market share instead of propping up prices by curbing output.
"The OPEC meeting in Vienna on Thursday is unlikely to see a change in the policy of maintaining market share," said Oxford Economics lead economist Patrick Dennis.
"Saudi Arabia can claim its policy has been successful with oil prices recovering at the same time as non-OPEC oil production has fallen back, leading to a more rapid global market rebalancing than expected."
Iran's representative to the OPEC said Tehran would not commit to any oil output freeze and that any discussion of rationing output would have to wait until the oil market had been stabilised.
Many Middle East oil producers have ramped up deliveries to Asia in an aggressive fight for market share.
But on the demand side, Morgan Stanley said it was worried about China.
"Our economists worry that April data showed China may be slowing ... The oil demand data from China should reinforce those concerns," the bank said.
China's official factory activity gauge expanded only marginally in May, data showed on Wednesday, while a private survey showed conditions deteriorated for a fifteenth straight month.
Chinese port congestion and the impending refinery maintenance season will also weigh on crude imports over the next few months, analysts at BMI Research said.
A rise of more than 20 percent, or almost $10 per barrel, since early April, has been powered largely by supply disruptions, especially in Africa and Canada, and as overall demand remains strong despite China's slowing economy.
© Thomson Reuters 2016
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