Oil prices have continued to fall, sliding from their record highs earlier this month and hitting some of their lowest levels since the start of June.
Traders said fears had eased that Hurricane Dolly would damage oil and gas supplies.
US light crude fell $3.98 to $124.44 a barrel, down from its record high of more than $147 on 11 July.
A report from the US Energy Department showed a bigger-than-expected jump in gasoline reserves.
Stockpiles grew by 2.9 million barrels last week, while the fall in crude oil inventories was less than had been expected.
The price of Brent crude slipped $4.26 to $125.29 a barrel.
Dolly spares production
There was relief in the market that the approaching Hurricane Dolly would not have a big impact on oil and gas production.
The US Minerals Management Service announced earlier on Tuesday that only 5% of oil and gas production in the US had been shut down.
"Oil is traded on futures markets, making it vulnerable to speculation that can move prices as much as $5 a barrel in a day" Why are oil prices falling?
"Dolly is not going to hit major production," said Jonathan Kornafel of Hudson Capital Energy.
Hurricane Dolly was expected to make landfall well away from important offshore platforms.
Mr Kornafel added that gains in the strength of the US dollar had also helped to push down the price of oil.
Meanwhile, the euro slipped to $1.5755 in European trade, down from $1.5788 late in New York on Tuesday. The pound was flat at $1.9922, while the dollar rose to 107.80 Japanese yen from 107.21 yen late on Tuesday.
'Slower growth'
Oil prices were still below $100 a barrel at the turn of the year, and despite the recent gains the price of crude is up almost 30% this year.
Prices are also more than six times higher than in 2002, driven partly by demand from booming Asian economies in China and India.
The economic slowdown in the US is a key factor behind the drop in oil prices, say dealers.
"The decline in oil prices reflects concerns that slower economic growth in the US and high oil prices are crimping oil demand," said David Moore, commodity strategist at Commonwealth Bank of Australia.
Data due later on Wednesday from the US Energy Information Administration is expected to show stocks of crude have fallen in the past month.
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