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Light sweet oil fell to $112.31 a barrel, its lowest in more than three months, before settling at $113.01.
Energy Information Administration data showed US demand for oil in the first half of 2008 saw its sharpest drop in 26 years, compared to a year before.
Oil prices have fallen from record highs of more than $147 in July, as the economy has slowed.
The Energy Information Administration (IEA) said that US demand for oil fell 800,000 barrels per day for the first six months of this year, compared to the same period a year earlier.
The IEA predicts that US oil demand next year will be at its lowest since 2003, at 20.08m barrels per day on "prospects of a weak economy and continuing high crude oil prices".
The latest figures showed that while US demand dropped sharply, non-industrialised nations saw demand rise by 1.3m barrels per day for the first half of 2008.
Commenting on the data, Kyle Cooper, an analyst with IAF Advisors, said: "It takes a lot of bullish arguments away, but $113 is still not cheap."
Separately on Tuesday, a plan between Russia and Georgia to end fighting between the two nations eased concerns that supplies in the region could be disrupted.
Though Georgia is not an oil producer, key crude and gas exports are transported through it.
(BBC)
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