US crude dropped 31¢ to stand at $88.59 a barrel and Brent crude fell by 9¢ to $113.93 over fears of another recession in the US, the world’s biggest economy, and the possibility that the debt crisis in Europe has cut fuel demand.

Investors, however, remain hopeful about fourth quarter oil demand after the US Federal Reserve said it was considering a range of actions to help the struggling economy, reports Reuters.

Meanwhile, the industry is watching the development of Tropical Storm Katia in the Atlantic, which could become a hurricane by Wednesday, according to the US National Hurricane Center.