Oil on Tuesday hit its lowest since May, falling towards $44 a barrel, pressured by concerns that a long-awaited rebalancing of the market would be delayed due to excess supply.

Brent crude is still up more than 60 percent from a 12-year low near $27 in January, but the rally has petered out on signs that the supply glut will persist and as economic jitters raised concern about the strength of oil demand.

Global benchmark Brent was trading at $44.49 a barrel at 0900 GMT, down 23 cents. It fell to $44.28 intraday, the lowest since May 10. U.S. crude was down 36 cents at $42.77, having fallen to its lowest since April earlier.

 Meanwhile, the yen rose around 1.5 percent to 114.88 yen per euro and 104.35 per dollar. Japan's stock market, which tends to fall as the yen rises, fell 1.4 percent.

"Right now, there is not much to be optimistic about," said Olivier Jakob, oil analyst at Petromatrix, citing weak refining margins that will probably weigh on crude demand. "We have to wait a little bit longer for the rebalancing."

Britain's BP, the first oil major to report second-quarter results, on Tuesday reported lower-than-expected profit and said its refining margins were the weakest for a second quarter in six years.

Record crude output from the Organization of the Petroleum Exporting Countries, a glut of refined products and signs of more drilling activity in the United States in the face of low oil prices have added to concern about excess supply.

US drillers added oil rigs for a fourth consecutive week. The decline in US output has been key to balancing a market weighed by excess supply for two years.

Also dampening sentiment, many traders are reducing their bets on rising prices.

Hedge funds and other money managers cut their net long position - bets on rising prices - in Brent and U.S. crude futures and options by 31 million barrels to 453 million in the week ending on July 19.

"Inputs on the speculative side are certainly more bearish than bullish," said analysts at JBC Energy in a report. "Crude fundamentals could certainly be used to make a case that there is some more downside to prices yet to be flushed out."

US inventory reports from industry group the American Petroleum Institute and the US Department of Energy due this week are expected by analysts to show a fall in crude stocks but a rise in gasoline supplies. - Reuters