New York's main contract, light sweet crude for September delivery, declined by 18 cents to USD 88.32 a barrel in morning trade and Brent North Sea crude for delivery in September fell 42 cents to USD 103.
Investors have been spooked by a deterioration in the long-running eurozone debt crisis as borrowing prices for Spain, the bloc's fourth biggest economy, struck a new high Tuesday, triggering concerns it may need a rescue.
"Spanish bailout worries continue to plague markets... Clearly these interest rates are unsustainable and action will need to be taken internally or externally to restore some confidence in buying Spanish debt," said Justin Harper, market strategist with IG Markets Singapore.
Investor confidence was also dealt a blow after ratings agency Moody's threatened to cut Germany's coveted top credit rating amid fears the eurozone's difficulties could pull it apart.
The announcement from pushed Spain's borrowing costs above 7.5 per cent, well above the seven-percent mark that forced others into seeking international rescues.