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Brent shed nearly $2 on Monday as investor worries over conflict in Iraq eased and as higher Libyan oil output added to already ample supplies.
Brent crude oil prices for delivery in October were down 13 cents at $101.47 a barrel by 1317 GMT, after closing $1.93 a barrel lower on Monday, and traders said that the market remained weak.
"It is still under pressure from a combination of factors: plentiful supply, a lack of supply outages and weak refinery demand. In addition, the continued withdrawal of speculative financial investors is exacerbating the downward movement," Commerzbank said in a research note on Tuesday.
Hedge funds and other big speculators cut their bets on rising Brent crude oil prices to the lowest level in two years, IntercontinentalExchange data showed on Monday, reflecting ample supply despite fighting in Libya and Iraq.
US crude for September delivery was slightly stronger than Brent, edging up 8 cents to $96.50 a barrel although the contract, which expires on Wednesday, ended the previous session down 94 cents.
The slightly stronger U.S. oil market was a result of expectations of lower refined product stockpiles.
US commercial crude oil and refined product stockpiles were forecast to have fallen in the week to Aug. 15, a preliminary Reuters survey of analysts showed.
The survey was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) due at 2030 GMT and from the U.S. Department of Energy's Energy Information Administration (EIA) due on Wednesday.
Yet analysts said that the overall outlook for crude was for low prices.
"Weak economic activity has undermined oil demand, forcing supplies into inventory. It is becoming clear that, because of weaker demand, inventories will be much higher than last month's forecast," analysts at PIRA Energy Group said.
However, analysts also said oil prices may find support at current levels due to ongoing geopolitical risk to supplies.
"Brent remains sensitive to any macro headlines now that the risk premium has been almost fully erased from the global benchmark price. A sustained price retreat below $100 is unlikely," VTB Capital said, but added that "on the upside, we have our near term resistance at $104.5."
Although a price much below $100 could lead to some support as some producers struggle to make money, current market levels are unlikely to be a concern yet for OPEC's top exporter Saudi Arabia, which favours an oil price of around $100 a barrel and would unlikely intervene to support the market unless prices dropped well below $100 a barrel.
