Oil prices drop as demand concerns dominate

Oil prices continued its downward trajectory on Tuesday, pressured by mounting concerns over the demand side.

The West Texas Intermediate for June delivery lost 3.33 U.S. dollars, or 3.2 percent, to settle at 99.76 dollars a barrel on the New York Mercantile Exchange. Brent crude for July delivery decreased 3.48 dollars, or 3.3 percent, to close at 102.46 dollars a barrel on the London ICE Futures Exchange.

The above market reactions followed a major setback on the oil market, which saw the U.S. crude standard and Brent tumble 6.1 percent and 5.7 percent, respectively, on Monday.

"The slump was sparked by economic concerns that were also expressed in sharply falling stock markets," Carsten Fritsch, energy analyst at Commerzbank Research, said Tuesday in a note.

"Furthermore, there was also some oil-specific news: Saudi Arabia's noticeable reduction of its official selling prices for Asian customers has clearly been interpreted by some market participants as a sign of weaker oil demand," he said.

Also weighing on the market was a strong U.S. dollar. The dollar index, which measures the greenback against six major peers, rose 0.26 percent to 103.92 in late trading on Tuesday, hovering near a two-decade high. A stronger dollar is a negative for commodities priced in the unit, making them more expensive for buyers using other currencies.

Traders are also awaiting data on U.S. crude stockpiles as the U.S. Energy Information Administration is set to release its weekly petroleum status report on Wednesday.