US crude settles down $2.84, at $50.02 a barrel

Reuters with CNBC
Brace for more volatility in oil prices: ANZ
Brace for more volatility in oil prices: ANZ

Brent crude and WTI prices slipped on Tuesday after the International Energy Agency (IEA) warned that oil prices may decline as stocks continue to increase this year.

U.S. crude futures closed down $2.84, at $50.02 a barrel after hitting a session low of $49.91 a barrel.

Brent crude fell about $2 to $56 a barrel, ending a three-day rally. The benchmark gained more than 9 percent last week, its biggest weekly rise since February 2011.

Oil stocks held by countries in the Organisation for Economic Cooperation and Development may come close to the all-time high of 2.83 billion barrels in the middle of 2015, said the IEA, which advises the West on energy policy.

"Despite expectations of tightening balances by end-2015, downward market pressures may not have run their course just yet," the IEA said in a monthly report.

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Vitol chief Ian Taylor, speaking at the International Petroleum Week industry conference, said he expected a "dramatic" build in oil stocks over the next few months but that supply and demand in the oil market would move into balance in the second half of this year.

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China's consumer inflation hit a five-year low for January, raising worries about oil demand in the world's second-largest economy.

"Economic activity is slowing, especially in heavy industry and that inevitably weighs on commodities," Michal Meidan, director of independent consultancy China Matters, said in the Reuters Global Oil Forum.

Oil prices received a boost on Monday after a monthly report by the Organization of the Petroleum Exporting Countries (OPEC) raised the forecast for 2015 demand for its oil to 29.2 million barrels per day (bpd), up 430,000 bpd from an earlier forecast.

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The IEA's medium-term report released on Tuesday predicted demand for OPEC oil would hold at 29.4 million bpd this year, and said U.S. shale oil output growth would pause before regaining momentum.

U.S. crude snapped three days of gains after a preliminary survey showed that U.S. commercial crude stockpiles likely hit a record high last week.

"Another report of strong builds in inventories in this week's EIA market report could halt oil's rally," ANZ bank said on Monday, referring to the U.S. Energy Information Administration's stockpiles data release due on Wednesday.

Elsewhere, Libya's Hariga port has reopened after guards ended a strike over salary payments, and the terminal will start loading tankers once better weather allows, a facility spokesman said.