After plunging to 12-year lows, prices soared late last week on hopes that plans for further economic stimulus measures in the eurozone and Japan would perk up demand.
But the rally fizzled out Monday on stubborn oversupply fears.
US benchmark West Texas Intermediate (WTI) for delivery in March was down 91 cents, or 3.0 percent, at $29.43 and Brent crude for March tumbled $1.14, or 3.74 percent, to $29.36.
WTI slumped 5.7 percent and Brent eased 5.2 percent on Monday.
“The decline is not very surprising because oil fundamentals still remain weak,” said Daniel Ang, an analyst with Phillip Futures in Singapore.
“We’re looking at strong oversupply and not-so-outstanding demand,” he told AFP. “It is going to be very difficult to maintain higher prices.”
A strengthening US currency also helped depress demand for dollar-priced oil, which becomes more expensive for holders of weaker units.
The dollar climbed ahead of a meeting this week of US central bank policymakers, with investors looking for an idea of their thinking just six weeks after announcing their first interest rate hike in since 2006.
The market is also anticipating the return of Iranian oil exports, which would further add to the oversupply.
A day after Western economic sanctions were lifted last week, Iran announced a major boost in crude production, with the National Iranian Oil Company saying it had ordered output to increase by 500,000 barrels per day.