New York's main contract, West Texas Intermediate light sweet crude for delivery in June, fell $1.81 to close at $109.24 a barrel, sliding underneath $110 for the first time since April 20.
In London, Brent North Sea crude for June dropped $1.26 to settle at $121.19 per barrel.
It was the second consecutive day of sharp falls for the WTI and Brent contracts, which have seen a steady surge in prices in recent months amid Arab unrest that has stoked supply fears.
Analysts say the oil market is worried that the higher prices will crimp consumer spending and consequently curb economic growth.
"It would appear that concerns are growing that the global recovery looks to be waning, with US growth softening and Chinese monetary policy tightening," said Michael Fitzpatrick at the Kilduff Report.
Traders were on the defensive Wednesday after the US weekly energy report and disappointing economic indicators.
The US Department of Energy (DoE) said that the nation's crude inventories leaped 3.4 million barrels in the week ending April 29.
The increase was much bigger than experts expected and followed a huge jump of 6.2 million barrels in the previous week.
The DoE also reported an unexpected decrease in gasoline reserves, by one million barrels.
"The market has become comfortable with the prospects of a strong gasoline season supporting refining margins. However, this is driven not by booming US demand which is running at 1.5 percent below a year ago but more the combination of low runs and strong import requirements from Mexico and possibly Brazil, plus the curtailment of Russian exports," said JPMorgan analysts in a client note.
US economic indicators published Wednesday also weighed on sentiment.
Payrolls firm ADP reported the private sector added a modest 179,000 jobs in April, down from March's 207,000 and fewer than analysts expected.
The Institute for Supply Management's April index on the huge services sector showed slower growth.