Oil fell more than 2% towards $40 a barrel today after a report showed a rise in crude inventories in the US, reviving concerns about oversupply and weak demand due to the coronavirus crisis.
The report from the American Petroleum Institute, an industry group, said crude stocks rose by 8.4 million barrels, rather than falling as analysts forecast.
Brent crude was down 84 cents, or 2%, to $40.34 a barrel today, while US West Texas Intermediate dropped $1.05, or 2.7%, to $37.89.
Both benchmarks had hit three-month highs on Monday. Brent has more than doubled since falling to a 21-year low below $16 in April.
But some analysts think the market has risen too far as the coronavirus pandemic continues.
They said that with equity markets edging lower, and a vast amount of good news baked into oil prices at these levels, it was no surprise that the oil market's confidence wavered slightly.
Oil prices have been supported by a record oil supply cut of 9.7 million barrels per day (bpd), about 10% of pre-coronavirus daily demand, by the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, a group known as OPEC+.
A gradual easing of government lockdowns that sought to limit the spread of the virus has revived demand by boosting travel and economic activity, also supporting the market.
OPEC+ agreed on Saturday to extend the record cut for another month until the end of July.
While this helped prices, the market came under pressure after Saudi Arabia, Kuwait and the United Arab Emirates decided not to extend their extra voluntary supply reductions.