Oil prices fell below $US60 a barrel for the first time in six months on Monday amid signs of growing petroleum inventories and after BP said it had permission to resume working the eastern half of Alaska's Prudhoe Bay oil field.
Hedge funds and investors have been bailing out because geopolitical tensions have eased and they also realise that inventories are high during this period of seasonally weak demand at the end of summer, said Victor Shum, an energy analyst with Purvin & Gertz.
By midday in Europe, light, sweet crude for November delivery had fallen 90 cents to $US59.65 a barrel in electronic trading on the New York Mercantile Exchange.
Monday was the first time since March 13 that intraday trading had fallen below $US60 a barrel.
November Brent crude on London's ICE Futures exchange dropped 92 cents to $US59.49 a barrel.
In other Nymex trading, natural gas futures fell more than 17 cents to $US4.452 per 1,000 cubic feet - after its lowest close last week since September 10, 2004.
Petrol futures slid two cents to $US1.4503 per gallon, while October heating oil futures declined 1.55 per cent to $US1.6317 a gallon.
Oil prices have fallen since the beginning of the month following a cooling in tensions between the United Nations and Iran, which had defied the UN's August 31 deadline to stop enriching uranium that could be used to produce nuclear weapons.
The high prices in July and August were largely fuelled by concern over the possibility that Iran could disrupt oil supply if sanctions were imposed or if the month-long conflict between Lebanon and Israel escalated.
Nigeria, Africa's largest crude oil producer, was also beset by troubles, including kidnappings of oil workers and a strike by workers' unions.
Fears of hurricane damage to US Gulf Coast refineries also drove the market higher this summer but the storms so far have blown past the coast.