Oil dropped in price by more than $US9 per barrel on Tuesday - the largest drop in dollar terms in 17 years.
US Federal Reserve Chairman Ben Bernanke said financial markets were under "considerable stress", adding to concerns about the strain of the weak housing market and high energy and food prices on the US economy.
US crude tumbled $US7.30 to $US137.88 per barrel at 17.17pm GMT on Tuesday. Crude hit a session low of $US135.92 in the biggest drop since 17 January, 1991. London Brent crude fell $US6.37 to $US137.55.
Commodity investors have pushed the price of crude oil up by nearly 50% to over $US147 a barrel.
OPEC on Tuesday cut its global demand forecast for 2008 for the fourth time this year, adding consumption would continue to slow in 2009.