Oil volatility continues to drive sentiment with both Brent and US crude diving and then recovering as traders assessed the latest US inventory data, taking equities along for the ride.

The gyrations came a day after Saudi Oil Minister Ali al-Naimi quashed hopes of a production cut, even as other countries are set to join the country's deal with Russia to freeze production at January levels.

"Al-Naimi's remarks punctured an oil price rally that has lacked substance," David Hufton of broker PVM told Reuters. "The market correctly interpreted the presentation as bearish."

The latest moves in oil came after a report that showed US crude stockpiles reached their highest in 86 years, at the same time as US gasoline stockpiles fell because of a surge in demand linked to low petrol prices.


Wall Street followed oil's path, paring earlier losses. In 12.51pm New York trading, the Dow Jones Industrial Average slid 0.8 per cent, while the Nasdaq Composite Index declined 0.6 per cent. In 12.39pm trading, the Standard & Poor's 500 Index retreated 0.9 per cent.

Treasuries advanced, pushing yields on the benchmark 10-year note five basis points lower to 1.67 per cent. Gold futures for April delivery rose 1.9 per cent to US$1,245.50 an ounce in New York.

Declines in shares of General Electric and those of Boeing, last down 2.6 per cent each, spearheaded the drop in the Dow.

Bank stocks also fell, with shares of JPMorgan & Chase last trading 1.7 per cent lower.

Some of the latest US data were disconcerting.

A Markit report showed its flash US services PMI business activity index declined to 49.8 in February, down from a 53.2 in January. A reading below 50 indicates a contraction in services sector activity.

"Markit's PMI survey data show a significant risk of the US economy falling into contraction in the first quarter," Markit said in a statement. "The flash PMI for February shows business activity stagnating as growth slowed for a third successive month. Slumping business confidence and an increased downturn in order book backlogs suggest there's worse to come."

Separately, a Commerce Department report showed single-family home sales slid 9.2 per cent in January to a seasonally adjusted annual rate of 494,000 units, from an unrevised pace of 544,000 units in December.

However, the Federal Reserve will have reason to raise interest rates this year, Richmond Fed President Jeffrey Lacker warned.

"I still think prospects for rate increases this year is the logical" view, Lacker said in a presentation to a business school in Baltimore, adding that economic data did not indicate that a recession was imminent in the US, Reuters reported.

In Europe, the Stoxx 600 Index ended the day with a slide of 2.3 per cent from the previous close, led by a retreat in mining stocks including Glencore and Anglo American. The UK's FTSE 100 Index dropped 1.6 per cent, France's CAC 40 Index sank 2 per cent, while Germany's DAX Index shed 2.6 per cent.