Oil prices dived under 105 dollars on Tuesday, reaching 4-month lows, after Hurricane Gustav apparently spared key US energy facilities and Iran said Opec must tackle excess production by members.
New York's main contract, light sweet crude for October, dropped as much as 10 dollars to 105.46 dollars a barrel from its closing level on Friday.
New York crude then rallied a little to stand at 105.96 dollars, down 9.50 dollars from Friday. US markets were closed on Monday for the Labor Day holiday.
Brent North Sea crude for October fell to 104.14 dollars at one stage, hitting levels last seen on April 4. It later recovered to stand at 104.86 dollars, a fall of 4.55 dollars from Monday's close.
Hurricane Gustav was downgraded to a Category One storm on Monday, easing fears that it could be as bad as the Hurricane Katrina disaster of 2005, which damaged major offshore oil installations in the Gulf of Mexico.
Meanwhile on Tuesday, Iran called for the Organisation of Petroleum Exporting Countries to discuss quota-busting by some members at its meeting in Vienna on September 9.
"The oil supply should be proportionate to demand and control of excess supply is an issue which should be addressed at the upcoming Opec meeting," Oil Minister Gholam Hossein Nozari told the official IRNA news agency.