A report from China on Monday that the country's crude oil imports in July were down 7 percent from last year fueled expectations that the economic slowdown affecting the U.S. and Europe may be spreading to Asia and cutting demand for oil.
A stronger dollar is also pushing prices down. The euro fell Tuesday to $1.4894, while the dollar was holding near 110 yen.
A weak dollar helped boost oil prices earlier this year, because dollar-denominated commodities are often used as hedges against inflation and a falling U.S. currency. But gains in the currency are reversing that trend.
In London, Brent crude for September delivery fell $1.21 to $111.46 a barrel.
Prices fell despite concerns that the widening conflict between Russia and Georgia over the breakaway province of South Ossetia could disrupt supplies in the region.
Russian forces pushed a second front deep into Georgia on Tuesday, seizing towns and a military base in the western parts of the country. Georgian President Mikhail Saakashvili said his country had been effectively cut in half with the capture of the main east-west highway near the central city of Gori.
Russia's massive and multi-pronged offensive has drawn wide criticism from the West, but Russia has ignored calls for a cease-fire and justified its actions as necessary to protect its citizens; most of the residents of the separatist regions have Russian passports.
The province broke away from Georgian control in 1992. Georgia, whose troops have been trained by American soldiers, began an offensive to regain control over South Ossetia last week, launching heavy rocket and artillery fire and air strikes that pounded the regional capital Tskhinvali. Georgia says it was responding to attacks by separatists.
Nymex crude is down about $33, or 22 percent, from its high of $147.27 on July 11.
In other Nymex trading, heating oil futures fell 1.31 cents to $3.1064 a gallon (3.8 liters) while gasoline prices dropped 1.42 cents to $2.8524 a gallon. Natural gas futures rose 0.1 cent to $8.35 per 1,000 cubic feet.