Oil fell below $113 a barrel Monday as fears eased that Tropical Storm Fay would damage major oil and gas infrastructure in the Gulf of Mexico.
U.S. light, sweet crude fell 90 cents, or 0.79 percent, to settle at $112.87 a barrel.
London Brent crude dropped by 61 cents to $111.94 a barrel.
World crude prices are more than 23 percent below the all-time peaks hit in mid-July, pulled lower by concerns that oil's six-year rally has undercut world energy demand growth significantly.
But oil prices remain up about 13 percent so far this year and more than five times higher than they were in 2002.
Monday's mild losses came as Tropical Storm Fay, the sixth named storm of the Atlantic hurricane season, appeared on a track that would narrowly avoid oil and gas production platforms in the Gulf of Mexico.
The storm was expected to hit Florida and move inland Tuesday, according to the National Hurricane Center.
"Although some offshore personnel evacuations were reported, the system appears likely to steer well east of significant production facilities or refineries,'' said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
(Watch the accompanying video to find out why some analysts believe oil will fall below $100...)
Shell Oil said Monday it had evacuated 425 nonessential workers from the gulf but added that it did not expect any impact from the storm on offshore assets and production.
Oil's losses were tempered by concerns over military tensions between Russia and Georgia that were hindering energy shipments through the region.
BP said exports of Azeri oil by rail to Georgia had stopped because of damage to a railway line in Georgia.
Also tempering oil's weakness was a decline in the value of the U.S. dollar, a factor that has boosted commodities markets in recent years by increasing the purchasing power of buyers using other currencies.
But a worsening economic outlook suggested oil prices could fall further unless OPEC members intervene, the Centre for Global Energy Studies said in its monthly report on Monday.