U.S. crude futures dropped $1.15 to $67.45, the lowest since May 22 and more than $10 below the record hit in late July on geopolitical worries and expectations for an active hurricane season. Brent crude dropped $1.14 to $66.95, also well below its August 8 peak of $78.65.
"We're not hyperventilating over Nigeria, Israel or Iran. We've run out of adrenaline and what we're left with are inventories that are higher than a year ago and a hurricane season that has been more fizzle than sizzle." said Tim Evans of Citigroup Global Markets.
U.S. crude inventories are around 6 percent higher than a year ago and the surplus is likely to widen dramatically due to the absence of a damaging hurricane in the Gulf of Mexico.
Analysts polled by Reuters estimated that crude supplies eased last week by 1.3 million barrels, while stockpiles of distillates like heating oil, jet fuel and diesel built by 1.3 million barrels.
Energy traders tend to shift their focus from gasoline to heating oil after the Labor Day holiday, the traditional end to the summer driving season. The U.S. government will release its data on Thursday, a day later than normal because of the holiday.
Analysts added the crude oil market was technically vulnerable following last week's break through the $70 a barrel mark and a convincing breach of the next key levels could herald an even deeper decline.
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