Oil prices were under pressure Tuesday as the International Energy Agency warned the market "could drown" in oversupply with the return of Iranian oil.
US benchmark West Texas Intermediate for February closed at $28.46 a barrel on the New York Mercantile Exchange, down 96 cents (3.3 percent) from Friday's settlement. The selloff brought WTI to its lowest level since September 2003.

In London, Brent North Sea crude for delivery in March rose to $28.76 a barrel, gained a modest 21 cents (0.7 percent) from Monday.

Regular trade on the New York market was closed for a public holiday on Monday, when Brent briefly fell below $28 for the first time in more than a decade after the United States and European Union lifted economic sanctions on Iran in exchange for its compliance with a deal to curb its nuclear ambitions.

That allows Iran to quickly increase oil exports, with an additional 500,000 barrels a day possible within weeks.

John Kilduff of Again Capital said that Brent's small rise was linked to a rally on European stock markets.

"The price remains to the downside as we continue to sort out the oversupply and Iran returns to the market," Kilduff said.

"They're already starting to battle with the Saudis for market share in Europe so it's going to be interesting times."

The International Energy Agency, in its monthly oil report Tuesday, said that crude prices were set to fall further this year with Iran's return to the market offsetting any production cuts from other countries.

"Can it go any lower?" the IEA asked. "Unless something changes, the oil market could drown in oversupply. So the answer to our question is an emphatic yes. It could go lower."