Benchmark U.S. crude fell $2.48 to $105.61 per barrel in New York while Brent crude lost $1.59 to $124.12 in London.
On Long Island Tuesday, the price of a gallon of regular gasoline was $4.052, up 14 cents from a month ago and nearly 27 cents higher than a year ago, according to auto club AAA. The average nationwide is now $3.846, up 57 cents since January, AAA says.
The Saudi government said it aims "to provide adequate supplies of petroleum, stabilize oil markets and return oil prices to fair levels for producers, consumers and the oil industry." Saudi Arabia produces about 10 million barrels a day and says it has the ability to quickly raise that to 12.5 million barrels a day.
Iran exports more than 2 million barrels of oil each day. The European Union and the United States have imposed sanctions that make it tougher for Iran to sell its oil. In response, Iran has threatened to block oil shipments through the strategically important Strait of Hormuz. A fifth of world's oil supplies pass through the strait at the edge of the Persian Gulf.
The ruler of Kuwait was quoted yesterday by the state news agency as saying that Iran has assured its neighbors that it won't block the vital waterway. He also said his country is increasing production. Those comments contributed to the decline in oil prices.
Reports from The Associated Press and Newsday staff contributed to this story.