Oil has fallen below $88 a barrel, losing ground after a US report downplaying Iran's nuclear ambitions had eased geopolitical concerns.
Oil prices have fallen about $10 in the past week
US light sweet crude fell $1.71 to $87.60 a barrel in New York, while a barrel of Brent crude dropped 63 cents, to $89.17 in London.
Tension between the US and Iran has contributed to the rally in oil prices.
Traders also reacted to mixed signals on whether Opec would increase oil production at a Wednesday meeting.
The US report by the National Intelligence Estimate said Iran had halted its nuclear weapons programme in 2003, contradicting the US administration's previous view.
"The chances of a unilateral or pre-emptive strike on Iran decreases with the NIE's announcement and make it much more difficult for the Bush administration to go down that path, so I think it is near-term bearish for prices," said Eric Wittenauer, an analyst at AG Edwards.
President George W Bush said the international community should continue to pressure Iran on its nuclear programmes and said Tehran remained dangerous despite the new intelligence report.
Oil prices have fallen in recent days on speculation that the Organisation of Petroleum Exporting Countries will increase oil production by 500,000 barrels per day to bring down prices.
Prices rose and fell throughout the trading day as differing statements were reported from delegates of Opec members arriving in Abu Dhabi for the Wednesday meeting.
Officials from Qatar, Venezuela, Iran and Libya have spoken against the need to pump more oil, while ministers from Indonesia, Nigeria and Kuwait said they were still open to increases.