By 1318 GMT, Brent crude was trading $2.20 lower at $119.41 a barrel. US crude for May, which expires later on Tuesday, fell $1.16 to $105.96.
Expectations that Greece would be forced to restructure its debt added to a bleak economic picture on Tuesday, a day after ratings agency S&P cut its outlook for US credit.
"There's still a few worries in Europe, yesterday's downgrading of the U.S didn't really help and I think we're going to have to look at tomorrow's energy figures to give us a bit more impetus," said Rob Montefusco at Sucden Financial.
"Events in the Middle East seem to be shoring up. We've had rhetoric from the Saudis that the markets are well supplied, and they're not going to be changing any quotas coming up," he noted.
Oil prices fell despite Goldman Sachs, the biggest US investment bank, beating earnings forecasts with results that while hurt by a fall in bond trading showed a surge in its commodities trading.
OPEC
OPEC Secretary General Abdullah al-Badri, speaking at an oil and gas trade fair in Tehran, said he did not expect oil to fall below $100 this year, even though there was no shortage in the market.
He reiterated OPEC's call on consumer nations to revise their tax systems to address what he called "exceptional circumstances," so as to lessen the burden of high prices.
The Organization of the Petroleum Exporting Countries (OPEC) has so far declined to take any formal action to cool oil's rally. Underlining that stance, Iran's oil minister said on Tuesday any increase in output would not bring down prices.
Top world exporter Saudi Arabia said over the weekend it had cut oil production by 800,000 barrels per day (bpd) in March, returning output to December levels, because of weak demand.
ECONOMY CONCERNS
In Europe, financial markets are increasingly convinced Greece will have to renegotiate the terms of its public debt, recognising that its economy cannot grow fast enough to service a burden that is set to swell to 160 percent of national output.
Concerns about how China's attempts to slow economic growth could impact oil demand, as well as high crude inventories in the United States were also pressuring oil prices.
Later on Tuesday, the Americam Petroleum Institute will release its weekly oil data at 2030 GMT.