The contract fell 90 cents Monday to settle at $112.87 a barrel after the threat of Tropical Storm Fay eased. That was the first time crude ended below $113 since May 1.
In London, October Brent crude fell 64 cents to $111.30 a barrel on the ICE Futures exchange.
Analysts also said oil pricing is likely to remain suppressed amid concerns that a global economic slowdown may further dampen world demand. But intermittent supply concerns due to the hurricane season and ongoing conflicts such as that between Russia and Georgia are likely to halt any sharp slide in pricing.
"Continuing worries about a U.S. economy slowdown, which may spread to the euro zone and perhaps also Asia are weighing down on oil pricing," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
"In the near term, there will be a lot of downward pressure but I don't foresee a fast collapse of pricing to $100 dollars a barrel or below. There is still strong support at $110 a barrel level because of supply side issues," he said.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, "especially since there is a clear lack of buying momentum."
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
Fay, the sixth named storm of the 2008 Atlantic season, swept over the Florida Keys on Monday after being blamed for at least 14 deaths in Haiti and the Dominican Republic as it moved though the Caribbean. Fay was expected to become a hurricane before curling up Florida's western coast and hitting the state's mainland sometime Tuesday.
Royal Dutch Shell PLC has evacuated 425 oil workers from the Gulf of Mexico as a precaution but said it will redeploy them if the storm remains on its current track. So far during this year's hurricane season in the Atlantic Ocean, no storm has significantly damaged oil installations in the Gulf.
A bearish forecast on Friday from the Organization of the Petroleum Exporting Countries of lower global oil demand growth also helped to push down oil prices.
In its monthly report, OPEC forecast that the world's daily appetite for oil this year would grow by 1 million barrels, a reduction of 30,000 barrels a day from its previous estimate. It predicted growth for 2009 will be 900,000 barrels a day, the lowest growth in world demand since 2002.
Analysts said uncertainty over the conflict between Russia and Georgia will support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
Oil market traders were also keeping an eye on possible tensions in Pakistan after President Pervez Musharraf announced his resignation Monday.
In other Nymex trading, heating oil futures fell 1.53 cents to $3.0695 a gallon, while gasoline prices lost 1.37 cents to $2.8015 a gallon. Natural gas futures fell 7.9 cents to $7.809 per 1,000 cubic feet.___ Associated Press writer Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.