New York's main contract, light sweet crude for delivery in February dropped 40 cents to $89.58 a barrel and Brent North Sea crude for February dipped 34 cents to $110.02.
Traders were bailing out after days of fruitless talks between rival lawmakers led by US President Barack Obama and House of Representatives Speaker John Boehner, IG Markets said in a report.
"The war of words continues between President Obama and Republican spokesman Boehner... As time begins to run out, traders get very nervous," the report said.
Obama on Wednesday leaned heavily on Republicans to come to terms on a deficit reduction deal by year's end to avert the sweeping package of tax hikes and spending cuts.
But even as Obama said he and the Republican leadership had narrowed their differences to within "a few hundred billion dollars," the two sides were gridlocked and rejected each other's offers.
Some $600 billion in tax hikes and spending cuts will take effect in less than two weeks, with the US economy likely to tip into recession if politicians fail to reach a deal to introduce less painful measures.