Oil prices fell by $2.34 a barrel on Tuesday, after reaching record highs over the previous three days.
Consumers still seem willing to pay top dollar prices for petrol
US light crude ended down $2.34 to $58.20 a barrel, while London's Brent crude dropped $2.02 to $57.28 barrel.
Analysts said the fall was likely to be temporary, and that oil prices should soon rise again due to supply concerns.
They put the drop down to some profit-taking by traders after prices hit record highs on Monday - $60.95 for US light and $59.59 for Brent.
In addition to concern about global crude supplies in the face of strong demand, uncertainty about the situation in Iran following the weekend's election of a new President is also supporting higher prices.
Demand for oil has shown little signs of abating, despite crude prices surging more than 60% during the past 12 months.
Meanwhile, Iran's new President Mahmoud Ahmadinejad has vowed to continue Iran's nuclear programme, drawing criticism from the US and heightening geopolitical worries surrounding the country.
There are also concerns that Mr Ahmadinejad will reform the country's oil sector, possibly shutting out foreign firms, a move that may disrupt supplies from the second biggest member of oil producing cartel Opec.
Jane Collin, an analyst at Energyintel, said that should Iran use its oil revenue to fund social programmes rather than reinvesting to boost production, then "Opec's ability to meet projected global demand could be tested to the limit".