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The market was also pulled lower by the strengthening dollar and a gloomy economic outlook contained in OPEC's monthly market report.
In late afternoon trade, New York's main contract, light sweet crude for November delivery, slid 61 cents to 81.60 dollars a barrel.
London's Brent North Sea crude for November fell 47 cents to 83.25 dollars a barrel.
"The OPEC meeting on Thursday is already casting a shadow," said Commerzbank energy analyst Carsten Fritsch.
"The Saudi Arabian oil minister gave some indication of the stance of the biggest OPEC producer yesterday, describing the oil market as well balanced and a price level of 70 to 80 dollars a barrel as appropriate."
Ali al-Nuaimi had said on Monday that he was "happy" with the current price of oil and saw no reason to change output quotas, as he arrived in Vienna on Monday for an OPEC meeting.
"Am I comfortable with the price? Yes," said al-Nuaimi, the de-facto head of the Organization of Petroleum Exporting Countries (OPEC), ahead of the cartel's gathering on Thursday.
"The price between 70 and 80 (dollars per barrel) is an ideal price," he added, noting that he was "happy" with the current situation.
Although oil prices were still above the 80-dollar mark on Monday after hitting five-month highs over 85 dollars last year, Nuaimi expressed satisfaction.
"We are comfortable with the whole market today, the situation in the market is very comfortable," he told journalists. "The economic growth of the world has been remarkable in 2010."
OPEC meanwhile hiked its world oil demand growth estimate for 2010 to 1.3%, but held steady its forecast for next year.
"Despite some turbulence and setbacks, the global economic recovery continues to provide support for oil consumption," the cartel wrote in its October monthly bulletin.
The cartel said it was pencilling in world oil demand growth of 1.13 million barrels per day (bpd) or 1.34% to 85.59 million bpd for the whole of 2010, "driven by the stronger-than-expected, stimulus-led economic growth in the first half of the year."
In 2011, oil demand would then increase by a further 1.05 million bpd or 1.2% to 86.64 million bpd, unchanged from the previous forecast, OPEC predicted.
Sokou added: "The release of the OPEC monthly report added further pressure to the energy market as OPEC reported that the pace of the global economic recovery remains uncertain."
Oil prices also fell on Tuesday as traders took their cue from the strengthening dollar. A rising greenback makes dollar-priced crude more expensive for buyers using weaker currencies. In turn that weighs on prices and tends to dent demand.
