Oil prices fell more than 1 percent on Tuesday, erasing early gains and pushing U.S. crude back below $40 a barrel as persistent worries of a glut offset the impact of a weak dollar that initially propped the market.
A slide in U.S. equities also forced U.S. crude futures, which plunged below the $40 level on Monday for the first time since April, to give back early gains of as much as 2 percent, traders said.
"There is much talk about the product glut replacing the oil glut, and this is a worrisome indicator for crude demand," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
U.S. West Texas Intermediate (WTI) crude settled down 55 cents, or 1.4 percent, at $39.51 a barrel. It had risen to $40.91 earlier.
International Brent crude oil futures were trading down 27 cents at $41.87 per barrel by 2:37 p.m. ET (1837 GMT), after rising to $43.18 earlier.