After a rally in the commodity that saw the US benchmark hit an 11-month high last week, investors are beginning to cash in and search out safe havens such as the yen and gold.
Equities markets around the world have been tumbling since late last week on worries about the global economy and central banks’ ability to provide support.
Those anxieties are being compounded by the real possibility that Britain will vote to leave the European Union, with several polls putting the pro-exit campaign in front just over a week before the ballot.
Supply-side worries have also increased after a Nigerian militant group on Sunday urged other rebels to join peace negotiations with the government to put an end to attacks on the nation’s oil installations.
Also, Canadian production, which was hammered by severe wildfires in May, is expected to slowly recover as the blazes diminish.
At about 0345 GMT, US benchmark West Texas Intermediate fell 56 cents, or 1.15 percent, to $48.32 and Brent slipped 51 cents, or 1.01 percent, to $49.84.
With prices having risen more than 80 percent since hitting near 13-year lows at the start of the year, companies are bringing more rigs back online as they become more economically viable.
“While US production has been consistently declining, there is the risk now that prices have reached a level where companies are happy to put drill rigs back to work and we could start seeing output climbing again in a month or two,” Melbourne-based IG markets analyst Angus Nicholson told Bloomberg News.
“We are also seeing a bit of nervousness across markets given the (British EU) vote comes up next week,” he added.
Dealers will be closely watching the release of official US stockpiles figures on Wednesday.
Analysts said markets are also having to filter mixed signals from the OPEC exporters cartel, which said in a report Monday that it expects a global supply glut to continue to shrink over the year.
However, it has made little effort itself to reduce output or supplies.
“These contradicting messages from OPEC means that traders are unable to digest OPEC’s true stance on the supply market,” said CMC Markets senior sales trader Alex Wijaya.