* Oil falls to three-week low just above $114 a barrel
* Federal Reserve may slow or halt bond buying -minutes
* Coming Up: EIA weekly oil inventories; 1600 GMT (Previous SINGAPORE, updates prices)
LONDON, Feb 21 Oil extended the previous session's decline on Thursday to a three-week low on concern the U.S. Federal Reserve might stop its stimulus program sooner than thought and on the prospect of a rise in Saudi Arabian oil output.
Rumours a hedge fund was liquidating positions had also helped send prices lower on Wednesday. Brent crude posted its largest one-day drop in 2013, alongside declines in other commodities and equities, although there was no evidence of liquidation by any specific fund.
Brent crude fell as low as $114.30, the lowest intra-day price since Jan. 31, and as of 0906 GMT was down $1.10 at $114.50 a barrel. U.S. crude slipped $1.53 to $93.69.
"Long position holders have been looking to sell for profit-taking," said Yusuke Seta, a commodity sales manager at Newedge Japan. "I guess this is a good time to sell."
Hedge funds and other large speculators have nearly doubled their bets that oil prices will rise since mid-December, and have amassed positions in Brent and U.S. crude futures and options equivalent to around 440 million barrels of oil, regulatory and exchange data show.
Brent had risen by $10 a barrel in the first six weeks of 2013 to hit a nine-month high above $119 on Feb. 8 on signs of strong demand from China and lower Saudi supply raised expectations of a tighter market.
On Wednesday, minutes of the Federal Reserve's last policy meeting cast doubts over how much longer the U.S. central bank would stick to its stimulus plan.
On Tuesday oil industry sources said the world's top oil exporter, Saudi Arabia, which cut supplies in the last two months of 2012, could raise its output in the second quarter to satisfy higher demand from China and feed economic recovery elsewhere.
Also weighing on oil, a report from the American Petroleum Institute on Wednesday said crude stocks rose by a more-than-forecast 3 million barrels. The U.S. government's weekly supply report is due later on Thursday.
Investors are also weighing the prospect of reduced tension between Iran and the West over Tehran's nuclear work. A Western diplomat said on Wednesday major powers are ready to make "a substantial and serious offer" to Iran during talks next week. (Reporting by Alex Lawler, Clarence Fernandez, Muralikumar Anantharaman and Tom Hogue; editing by Jason Neely)