Oil prices have tumbled to seven-week lows amid concerns that the slowing US economy will weaken demand.
US sweet, light crude fell $2.23 to settle at $123.26 a barrel - more than $20 off their peak earlier in July, when prices reached a record $147.27.
Brent crude in London also fell, dropping $1.92 to $124.52.
The oil market has been volatile as traders assess whether there will be enough supply to meet demand, with some predicting further price falls.
Analysts at Lehman Brothers predict oil prices could drop below $100 by the end of the first quarter of 2009.
But others are sceptical.
"Nothing in the fundamental drivers has changed," said Harry Tchilinguirian, an oil analyst at BNP Paribas.
Volatile market
Since last September, traders have been betting that the need for oil from economies, such as China, would continue to power the demand for oil.
Earlier this month, the International Monetary Fund (IMF) upgraded its economic forecasts for these countries.
At the same time, tensions between politically unstable oil-producing nations and the West sparked fears that supply would be constrained.
The weakening US currency has also encouraged investors to switch into commodities, which have been seen as a more attractive investment as the US economy falters.
A slight rebound in the dollar after a smaller-than-expected decline in new housing sales helped to give oil prices some relief, analysts said.
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