Oil fell more than $2 on Monday after a warning by top bank Citigroup of more write-downs related to risky U.S. mortgages heightened concern over the economic health of the world's biggest fuel consumer.
U.S. light crude fell more than $2 at one stage. It stood $1.93 lower at $94.00 by 9:19 a.m. EST. It hit a record high of $96.24 on Nov 1.
London Brent crude was $1.70 lower at $90.38.
Oil has climbed about 40 percent since the summer and reached a record high above $96 a barrel last week, boosted by the weak dollar, concerns over tight supplies this winter and speculative inflows into oil and other commodities.
But Citigroup's write-off of up to $11 billion in subprime mortgage losses has sparked new worries over the U.S. economy and the prospects for a slowdown in its energy demand growth.
The myriad of banks confessing to write-downs, no doubt, is contributing to an air of anxiety in the financial markets, while increasing the odds of a possible U.S.-led recession being triggered, said Edward Meir of MF Global.
European shares fell early on Monday for the third session in a row on worries over the extent of the credit crisis.
Tensions in the Middle East have helped drive oil's ascent, including a recent flare-up between Turkey and Kurdish rebels in northern Iraq. But analysts said a slight softening in tone was helping to pressure prices.
Iraq said on Saturday it was ready to arrest Kurdish guerrilla leaders responsible for cross-border raids into Turkey to avert a major incursion by the Turkish military.
And Iran, the world's fourth-biggest oil exporter, said on Sunday it welcomed proposals to work with other countries on uranium enrichment, but will not accept an offer that requires it to halt its sensitive atomic work.
Speculators on the New York Mercantile Exchange crude oil market increased their net long positions in the week to October 30, data from the U.S. Commodity Futures Trading Commission showed.
But the increase may reflect management of existing trading positions rather than new inflows of money, which raises doubts about the sustainability of oil's advance.
We have reached last week new record highs for (U.S. crude) that is making it within shorter shooting distance of $100 a barrel, said Olivier Jakob of oil consultancy Petromatrix.
(Additional reporting by Fayen Wong in Sydney)