"Today is just another economic story that's fed the dollar's strength and with the weekly build expected in U.S. crude, prices are getting a double whammy," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York.
"Yes, we have storm concerns but they are not really affecting production as much as the market bulls would like."
The dollar index, which measures the greenback against a basket of currencies, hit session peaks after the U.S. Consumer Expectations Index rose to October highs.
The dollar has rallied since Friday, after Federal Reserve Chair Janet Yellen raised expectations for a U.S. rate hike in a policy speech. A stronger greenback tends to make dollar-denominated commodities such as oil costlier for holders of other currencies.
Analysts said they expected U.S. crude stockpiles rose 1.3 million barrels last week, the second straight weekly build, as the peak summer period for U.S. driving and gasoline consumption winds down.
Trade group American Petroleum Institute will issue a preliminary inventory report after Tuesday's market settlement at 4:30 p.m. EDT (2030 GMT), ahead of official data on Wednesday from the government.
An Iranian government official said at an oil industry conference in Norway that Tehran's production was expected to hit 4 million barrels per day by year end. Iran was producing that much before Western sanctions brought its oil exports down.
Oil rallied about 20 percent earlier this month, after the Organization of the Petroleum Exporting Countries said it was working with non-OPEC members to reach a production freeze. Iraq said on Tuesday it was committed to freezing output when OPEC meets informally for talks with other producers in Algeria next month.