Brent, the international benchmark for crudel, fell below $40 during the second day of trading, for the first time since June 25, as prices remained depressed over a weak demand outlook.
Slow pick-up in demand from Asia as well and higher supply from Opec+ producers from August onwards led to weaker prices.
Brent, under which two-thirds of global crude is traded, was down 4.95 per cent to $39.93 per barrel at 5.57pm UAE time. West Texas Intermediate, which tracks US crude grades, was down 7.37 per cent to $36.84 per barrel.
Oil demand is recovering “sequentially” as lockdown measures in place to contain Covid-19 outbreaks across countries are being eased, Bank of America said in a note on Tuesday.
"Still, it could take a few years until all segments of oil consumption surpass levels seen prior to the Covid-19 shock,” the bank said.
Global demand for crude from road traffic is expected to fully recover and register positive year-on-year growth this year.
However, recovery is harder for air travel, which was hit hard by the grounding of airlines as countries enforced mobility restrictions to limit the transmission of the coronavirus.
Oil demand could rise by 4 million barrels per day to 104m bpd between from 2019 and 2025 but the path to recovery is likely to be “uneven”, Bank of America said.
Air travel still languishes at around 50 per cent of the volume prior to the pandemic.
“Air travel will not recover materially beyond this point until we get a vaccine or an effective cure for Covid-19. Most experts expect it will take 12-18 months to have a safe and effective vaccine that most governments around the world roll out for mass immunisation,” the bank said.
Organisations such as the International Energy Agency expect demand to average 91.9m bpd in 2020, 8.1m bpd less than the previous year.
On Monday, the leaders of Saudi Arabia and Russia reaffirmed their commitment to work together to rebalance oil markets on Monday.
King Salman said Moscow played a "constructive role" in achieving "stability and balance" in oil markets in a statement following a phone call with Russian President Vladimir Putin, according to the Saudi Press Agency.
Saudi Arabia and Russia lead the Opec+ alliance of oil exporters who agreed to cut back an historic 9.7m bpd from May until July, to counter a record decline in demand due to the pandemic. The alliance has since eased cuts and is currently drawing back 7.7m bpd from the markets.
