New York's main contract, light sweet crude for December delivery slid 16 cents to USD 85.22 a barrel and Brent North Sea crude for delivery in December shed 35 cents to USD107.91.
Fears over the US fiscal cliff of tax hikes and spending cuts, which would tip the economy into recession, have dogged investors since the re-election last week of President Barack Obama.
Adding to uncertainty was eurozone finance ministers' delay to a decision on releasing the next batch of Greece's much-needed bailout cash.
"Crude oil fell... over concerns about lower demand in a well-supplied market and as the United States and Europe grappled with fragile economies," Phillip Futures said in a report.
"Oil prices also came under pressure from an International Energy Agency report that cut estimates for global oil demand in the last quarter of this year and for growth in 2013."
The IEA -- which represents oil-consuming countries -- predicted Tuesday that global demand will have increased by 670,000 barrels per day (bpd) in 2012 to 89.6 million bpd.
This was 60,000 bpd less than projected a month ago. For next year, the Paris-based group tipped a rise to 90.4 million bpd -- 100,000 barrels less than the previously stated -- due to sluggishness in the developed world.
Also, Organisation of Petroleum Exporting Countries Secretary-General Abdullah El-Badri yesterday said there was an ample supply and blamed speculators for high oil prices. "There is no shortage of oil anywhere in the world," El-Badri told delegates.