Oil fell Tuesday, as concerns about U.S. economic health and signs OPEC was ramping up output pulled prices further from the record above $90 struck last week.
U.S. light, sweet crude traded down 75 cents to end at at $85.27 per barrel.
London Brent fell 53 cents to $82.74 per barrel.
"Today's news was OPEC output up already ahead of Nov. 1," said Tom Bentz, analyst at BNP Paribas Commodity Futures.
The cartel has boosted October supplies by 500,000 barrels per day in anticipation of Nov. 1, when an agreement to raise production by half a million barrels kicks in, according to tanker tracker Petrologistics.
Oil has dropped from the $90.07 peak hit Friday amid worries that a housing slump could drag down the U.S. economy and hurt demand in the world's biggest oil consumer.
The dollar's rally Monday from a record low against the euro helped weaken many commodities prices. The dollar slipped again Tuesday, however.
Oil has risen about 40 percent from the start of the year, propelled by worries about a tighter supply/demand balance ahead of the Northern Hemisphere's winter, plus political tensions in the Middle East.
Fears that Turkey might push into northern Iraq helped drive prices to new peaks last week.
Iraq promised on Tuesday to close the offices of Kurdish rebels and work to prevent them launching attacks on Turkey, hoping to head off a threatened invasion to crush them by Turkish troops massed on the border.
Turkey said Monday it would exhaust diplomatic channels before any strike into northern Iraq against Kurdish rebels, who killed at least a dozen Turkish soldiers in fighting over the weekend.
"The market is still overheated from its rally and could go down to around $80. But depending on what the U.S. stocks do and if the dollar weakens again, the market could go up to $90," said Gerard Rigby from Fuel First Consulting in Sydney.
The United States will release weekly oil stocks data on Wednesday.
U.S. crude oil stocks are seen up 100,000 barrels, after a 1.8 million-barrel build in the week ended Oct. 12. A Reuters poll also forecast a 1.1 million-barrel increase in gasoline stocks, but a 300,000-barrel draw on distillates for the week to Oct. 19.