Oil prices have dropped below $37 a barrel after an industry report highlighted an increase in crude inventories in the US countered output freeze plan by major oil producers.

Brent crude fell 27 cents at $36.54 a barrel, while the US crude slipped 66 cents at $33.74, Reuters reported.

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Data released by the American Petroleum Institute (API) revealed that crude inventories in the US increased by 9.9 million barrels last week.

"Although the market had hoped that some of these producers would immediately cut oil production, we still see this agreement as a strong message."

Investors are watching for the data to be released by the Energy Information Administration and weekly supply figures from the US Government for confirmation of the inventory build.

In mid-2014, crude collapsed from over $100 due to more supply and a decision by the Organization of the Petroleum Exporting Countries (OPEC) to abandon its traditional role of cutting production by itself to increase prices.

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Major oil producers including Saudi Arabia, Qatar, Venezuela and Russia proposed to freeze output at January levels to tackle supply glut.

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ABN Amro told the news agency: "Although the market had hoped that some of these producers would immediately cut oil production, we still see this agreement as a strong message."

Sources said that OPEC is unlikely to cut production at its next meeting to be held in June, even if oil prices remain low.