The price of oil fell to near $88 a barrel amid worries over the US economy, largely because a budget deal has yet to be agreed between the White House and Congress.
By early afternoon in Europe, benchmark crude for January delivery was down 81 cents to $88.28 a barrel in electronic trading on the New York Mercantile Exchange.
Oil prices have been knocked by a survey showing that manufacturing the US shrank in November to its weakest level since July 2009.
Businesses are concerned about the so-called "fiscal cliff" - sharp tax increases and spending cuts that take effect in 2013 unless US political leaders strike a budget deal before then.
However, flaring tensions in the Middle East, including Egypt's widening political crisis and reports that Syria may be readying its chemical and biological weapons against rebels, kept prices from falling more.
A falling dollar, which makes crude cheaper for traders using other currencies, also supported prices.
Brent crude, which is used to price international varieties of oil, was down $1.26 to $109.66 per barrel on the ICE Futures Exchange in London.
