Crude prices slumped on Monday, pulled down by concerns over Europe's debt crisis and the debt-ceiling impasse in Washington.
New York's main contract, West Texas Intermediate light sweet crude for delivery in August, shed $1.31 to close at $95.93 a barrel.
In London, Brent North Sea crude for September delivery lost $1.21 to settle at $116.05 on the IntercontinentalExchange.
The retreat in oil markets came as investors, spooked by debt worries in the United States and Europe, fled risky assets, triggering a global sell-off in stocks and pushing gold to new record highs of above $1,600 a troy ounce.
"Investors ran to gold, silver (and) away from oil and some other commodities," said Phil Flynn, an analyst with PFG Best Research.
In Washington, senators were struggling to bridge a deep partisan divide and forge a compromise deal to raise the US federal government's debt ceiling by August 2 in order to avert a potentially disastrous default.
Meanwhile, the eurozone's leaders were preparing for an emergency summit on Thursday aimed at preventing a default by Greece, which could have destabilizing effects on larger European economies.
The debt problems on both sides of the Atlantic have fueled fears of an economic slowdown or even a double-dip recession, which would lower global energy demand.