Benchmark crude for May delivery fell 73 cents to $50.32 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. The contract fell $1.46 on Monday to settle at $51.05.
Oil prices jumped from below $35 in February to above $54 last month as investors speculated that the U.S. will likely avoid a depression this year. But some analysts fear there hasn't been enough evidence of economic recovery to warrant the recent run-up in prices.
Aluminum producer Alcoa Inc. is the first major company scheduled to announce earnings results Tuesday.
"The broad picture is that of a very weak international economy," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "I think the lift in oil prices was a little premature."
Crude investors brushed off a dismal U.S. jobs report when it was released on Friday that showed the unemployment rate rose to 8.5 percent in March, a 25-year high. But the accumulation of months of massive layoffs will likely erode consumer demand for the rest of the year, Moore said.
"It's an indication of how weak the U.S. economy is," he said. "Concerns about weakness in U.S. consumption are likely to remain dominant and continue to bite away at the market's optimism."
Moore said he expects the price of oil to drift down to the $40s during the second quarter.
Gasoline prices have also been recovering somewhat from the lows of a few months ago. But they remain far below the $4-a-gallon pain threshold of last summer.
Analyst and trader Stephen Schork cited U.S. Energy Information Administration figures showing retail prices at $2.037 a gallon Monday, noting: "That is $1.295 or 39 percent cheaper than a year ago."
Gasoline and heating oil for May delivery fell by lesss than a penny to $1.47 a gallon and $1.41 a gallon on the Nymex. Natural gas for May delivery also slipped, down more than 6 cents to fetch $3.71 per 1,000 cubic feet.
In London, Brent prices fell by 52 cents to $51.72 a barrel on the ICE Futures exchange.
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Associated Press writer Alex Kennedy contributed to this report from Singapore.
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