New York's main contract, light sweet crude for delivery in January, fell 53 cents to $97.48 a barrel.

Brent North Sea crude for January delivery shed 26 cents to $108.77.

Crude markets were depressed by worries over the economic situation in the United States and Europe, Barclays Capital said in a report.

"Macro concerns remain in the driving seat and, with a slightly softer fundamental picture, downward pressure" on oil prices rises, it stated.

The US Commerce Department on Tuesday sharply lowered its third quarter growth estimate to 2.0 percent from 2.5 percent.

It did not bode well for crude prices as the United States is the world's largest oil consumer.

Traders also continued to fret over Europe's debt woes, the Barclays report said.

"Key event risk, particularly related to European politics and sovereign debt markets, is set to continue to be the main driver of risk assets in the coming weeks and oil is unlikely to remain unscathed," it said.

The International Monetary Fund on Tuesday announced a new lending facility aimed at helping "bystander" countries protect themselves from contagion during financial crises, sparking a crude oil rally.

While no official mention of potential borrowers was made, it appeared designed for countries such as Italy and Spain, which have massive debt burdens but reasonably sustainable fiscal imbalances in the short term.