On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD96.15 a barrel during European afternoon trade, dropping 0.78%.
Investors were cautious after the Federal Reserve Bank of New York said on Monday that its index of manufacturing activity fell unexpectedly to minus 10.4 in September, a three-year low, from a reading of 5.8 the previous month.
Analysts had expected the index to decline to improve to minus 2 in September.
The data came after the Federal Reserve announced last week that it would buy USD40 billion of mortgage-backed securities every month and would keep buying them until the job market improves.
The bank also said it expects to keep short-term interest rates at record low levels through at least mid-2015, six months longer than previously anticipated.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Meanwhile, oil traders continued to monitor rising geopolitical tensions in the Middle East and Africa following attacks on numerous U.S. embassies across the region.
The violence in the Middle East and North Africa, which hold more than half of the world’s oil reserves, was prompted by extracts of a film that portrays Muhammad.
The unrest also follows the killing of the U.S. ambassador to Libya, Chris Stevens, and three officials during an attack on consular buildings in Benghazi on September 11.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery fell 0.25% to trade at USD113.48 a barrel, with the spread between the Brent and crude contracts standing at USD17.33 a barrel.
Later in the day, the U.S. was to release official data on the current account, as well as a report on the balance of domestic and foreign investment in long-term securities.
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