New York's main contract, light sweet crude for delivery in January was down 16 cents to $87.72 a barrel in the morning and Brent North Sea crude for January shed nine cents to $108.72.
A weekly US government report released Wednesday showed a surge in supplies of gasoline and other products, indicating softer demand in the world's biggest oil consuming nation.
The supplies of distillates, which include diesel and heating fuel that are closely watched at the onset of winter, rose by three million barrels, while gasoline inventories leaped by 7.9 million barrels, five times more than forecast.
"Oil prices fell... after data showed a huge increase in gasoline stockpiles in the United States last week," Phillip Futures said in a market commentary.
The political impasse in Washington over avoiding mandatory fiscal cliff of tax increases and spending cuts in January that may toss the US economy back into recession was casting a cloud on sentiment.
President Barack Obama on Wednesday warned Republicans not to hold the US economy hostage to politics.
Obama and Republican foes accused each other of intransigence as vital hours passed without serious negotiations on the looming crisis.