Benitez told official website www.liverpoolfc.tv: "We tried until the very end to sign Michael. We even made phone calls early yesterday morning. In the end, it was impossible.
"When we spoke to Madrid, they only ever talked about £16million. We couldn't spend that much money on a player we sold for £8million. We have to think about the club over any player in this situation. Real Madrid put a lot of pressure on Michael to go to Newcastle because they wanted the money to sign Sergio Ramos. I hoped Michael would say no and then, maybe, we could do something.
"Whenever I was asked about Owen I had to respect the strikers we have at the club. We had offers for (Djibril) Cisse, some involving loan deals. We never planned to sell Cisse but when Madrid kept on telling us they wanted £16million, it was a problem and we had to look at different possibilities. We had clubs interested in Djibril, but we made it clear to them we wanted to keep the player.
"I like Cisse and he is the type of player we need to score a lot of goals and he showed that in the Super Cup final. We didn't want to sell him and that's why we turned down some offers. I thought we could bring Michael to the club because Neil Mellor is out injured for a few more weeks and some clubs are interested in taking him on loan.
"We need different sorts of strikers at the club and having Michael, Florent Sinama-Pongolle, Fernando Morientes, Peter Crouch and Djibril Cisse would have given us many different options."