Oil prices have plummeted due to a substantial increase in US fuel inventories, as well as a sharp fall in demand from China.

International Brent crude futures LCOc1 fell by 35 cents to reach $54.70 per barrel while US West Texas Intermediate (WTI) crude CLc1 was down by 49 cents to touch $51.68 a barrel, reported Reuters.

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The last two days have seen oil prices drop by more than 1%.

The sudden fall in prices was triggered by concerns over huge increase in US oil stocks.

American Petroleum Institute (API) reported that crude inventories swelled by 14.2 million barrels to reach 503.6 million barrels against a forecast of a conservative increase of 2.5 million barrel in the week ending 3 February.

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Gasoline inventory also increased by 2.9 million barrels against a predicted growth of 1.1 million.

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"The reaction was predictable as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff."

OANDA official Jeffrey Halley in Singapore was quoted by the news agency as saying: “The API delivered a Goliath crude inventory number… The second highest on record. The reaction was predictable as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff.”

Energy Information Administration (EIA) predicts US crude output to rise by 100,000bpd to 8.98 million barrels this year.

Prices also dipped due to slowing demand from China, which is the world's second largest consumer of oil after the US.

Last year, demand for oil in China increased by only 2.5%, which is the lowest in the last three years.

Analysts opine that the decline in China’s demand for oil was due to the sluggish growth rate that stood at 6.7%, the slowest in the last 25 years.