(Update 4: Wed 10/09/14 20:14:55)

LONDON/TOKYO (Sept 10): Brent crude dropped to a new 16-month low below $99 a barrel on Wednesday, as rising supplies and weak demand helped extend losses into a fifth session, even as top oil exporter Saudi Arabia said it had cut oil production last month.

Brent has fallen by more than 14 percent since hitting a year high above $115 a barrel in June, with fast-rising U.S. output and the return of exports from Libya creating a market that looks increasingly over supplied.

Saudi Arabia, the world's largest oil exporter, told OPEC it had reduced its oil output by 400,000 barrels per day last month, the producer group's monthly market report showed on Wednesday.

But while the Saudi cut came as prices came under pressure, others viewed it as a seasonal response to lower domestic demand after the peak of summer. Secondary sources also said total OPEC output still rose last month, helped by higher production from Libya and Angola.

Brent crude for October delivery hit a low of $98.80 a barrel, the lowest intraday price since May 1, 2013. It was trading down 15 cents at $99.01 a barrel at 1159 GMT.

U.S. crude was down 30 cents at $92.45 a barrel. Its discount to Brent narrowed in early trading to just over $6 a barrel, the lowest since mid-August, before widening again.

"I wonder how much further Brent could fall after falling below the psychologically important $100," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

"America has entered seasonal (refinery) maintenance and demand is weak."

Oil prices on both sides of the Atlantic have dropped over the past three months, dragged down by soaring U.S. shale oil production which has replaced many imports from West Africa, Europe and other regions, leading to a supply glut in the Atlantic Basin and Asia.

The U.S. Energy Information Administration (EIA) said on Tuesday that U.S. output in August hit its highest level since 1986.

The United States is the world's largest oil consumer and as recently as 2010 was reliant on imports for almost 50 percent of its consumption. That is expected to fall to just over 20 percent next year, the EIA said.

Traders are increasingly moving oil into storage in a bid to sell it forward for later delivery at a higher price, with spot prices falling to an increasing discount due to increasing supplies, a market structure known as contango.

Chinese trader Unipec has booked the world's largest ship, a 3.2 million barrel capacity supertanker, to store Russian oil until prices recover, trading sources said this week, with analysts estimating about 50 million barrels of oil have already moved into floating storage.

U.S. crude stocks

Despite stronger U.S. production, data from industry group the American Petroleum Institute showed a 1.9 million barrel decline in U.S. crude stocks last week, versus analysts' expectations for a drop of 1.1 million as refiners produced more gasoline and diesel ahead of seasonal maintenance work.

Inventories at Cushing, Oklahoma, the closely-watched delivery point of the U.S crude oil contract, fell 261,000 barrels, the API said, while gasoline and distillate stocks rose.

Weekly government stockpile data from the EIA will be released later in the day at 1430 GMT.

Investors are also eyeing the Gulf Arab oil ministers' annual meeting on Thursday in Kuwait which could include discussions about oil prices now that Brent has dropped below the $100 a barrel level.

Ukraine also remained in focus.

The United States was putting the finishing touches on possible new sanctions on Russia's defence, energy and financial sectors over its intervention in Ukraine, the U.S. State Department said on Tuesday.