Oil dropped below $57 a barrel on Wednesday and was heading for its biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the US shale boom and Opec's refusal to cut output.

Global benchmark Brent crude has fallen 49 percent in 2014 as demand growth slowed, the United States expanded output and Opec, dropping its strategy of trimming supply to keep oil around $100 a barrel, chose instead to defend market share.

On Wednesday, prices came under pressure from a survey showing China's factory sector shrank for the first time in seven months in December - a bearish indication on the strength of oil demand in the world's second-largest consumer.

"Clearly, demand concerns are one of the issues for the oil market," said Michael McCarthy, chief market strategist at CMC Markets.

Brent was down $1.00 at $56.90 by 0917 GMT, after dropping as low as $56.87. US crude was down 57 cents at $53.55.