By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell more than 1 percent on Monday, hitting two-month lows on extended selling after the market's break below a key technical support level last week due to oversupply fears.

The market last week slumped nearly 8 percent in its biggest weekly losses in six months and already hit a two-month low on Thursday after disappointing drawdowns in U.S. crude and gasoline inventories pointed toward weak demand. [EIA/S]

The rising U.S. oil drilling rig count and cuts in bullish hedge fund bets on crude to four-month lows also added to the hard fall in prices. [RIG/U]

"We have shifted to a bearish trading stance and off a neutral posture that we had maintained for approximately a month following transition from a bullish view in early June," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Brent crude futures <LCOc1> settled down 51 cents, or 1.1 percent, at $46.25 per barrel. The session low was $45.90, the lowest since May 11.

U.S. crude's West Texas Intermediate (WTI) futures <CLc1> slipped 65 cents, or 1.4 percent, to settle at $44.76 a barrel.

Both benchmarks fell further in post-settlement trade, with WTI sliding 2 percent to a fresh two-month low of $44.42 on the back of the thinnest trading volume in five sessions.

"We have suggested the likelihood of a price downdraft in WTI and Brent to about $37 and $38 areas, respectively," Ritterbusch said, adding that the move lower could be volatile, however, with occasional rallies of $1 to $2 a barrel.

Oil prices were down since trading began in Asia on Monday as refiners in that region cut back on crude orders due to worries of an economic slowdown.

The market shrugged off data from market intelligence firm Genscape, which according to traders reported a drop of 488,625 barrels at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to July 8.

A Reuters poll, meanwhile, forecast total U.S. crude stocks fell 3.3 million barrels during the week to July 8.

"Oil prices could drop more," said Fawad Razaqzada, analyst at in London. "In the short-term, the bulls will need WTI to climb back above $46 and Brent $47, otherwise prices may head at least towards the support trend."

(Additional reporting by Ahmad Ghaddar in LONDON, Henning Gloystein in SINGAPORE and Osamu Tsukimori in Tokyo; Editing by Marguerita Choy)