Oil prices on both sides of the Atlantic dropped sharply a few minutes ahead of the market close on Thursday as traders sold contracts and booked profit ahead of the holiday weekend as a U.S.-led strike on Syria remained uncertain.
The United States and its allies had been gearing up for an attack in response to reports that the Syrian government used poison gas against its civilians.
The White House said on Thursday it was contemplating a "very discrete and limited" response to any findings that Syria used chemical weapons.
Still, the U.S. and its allies have "no smoking gun" to prove Assad personally ordered the attack, U.S. national security officials said.
Traders gave back gains on Thursday after prices surged on Wednesday to their largest two-day rally since January 2012. Fears that Western intervention in Syria would spur a wider conflict and destabilize the entire Middle East, which pumps a third of the world's oil, drove the frenzy.
The lack of clarity from western powers on Thursday about what their next move might be kept the market "jittery", prompting traders to sell out of their positions.
"People don't want to go home long or short the market," said Rich Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.
Brent oil prices have been mostly on an upward rise since mid-April as global supplies have tightened. Prices peaked at a six-month high of $117.34 on Wednesday on fears of a military strike in Syria.
This prompted the International Energy Agency to release a statement on Thursday that oil markets were well supplied to quell fears that rising prices would thwart economic recovery.
Brent crude for October delivery settled $1.45 per barrel lower at $115.16, after trading as low as $114.91 just ahead of the market close. It jumped more than 5 percent in the previous two sessions, posting its strongest two-day gain since January 2012.
U.S. crude oil for October delivery settled down $1.30 per barrel at $108.80, not far off its session low of $108.40.
Gasoline and heating oil futures also dropped sharply at the market close as those contracts were set to expire on Friday.
U.S. gasoline futures ended the day less than one percent lower at $3.0664 a gallon after trading as high as $3.10. Heating oil settled at $3.18 after trading as high as $3.22.
Strikes and civil unrest by Libyan workers and maintenance in Iraq have cut into global supply.
Saudi Arabia, OPEC's largest oil producer, stepped in and said it would pump a record 10.5 million bpd of crude on average throughout the third quarter, U.S. energy consultancy PIRA said.
The oil market was tighter in July with supply disruptions reaching 2.7 million bpd and global oil consumption is expected to increase in the third quarter by close to 1 million barrels per day, the U.S. Energy Information Administration said in a report earlier this month.
"The Saudis are concerned over demand destruction," said Addison Armstrong, director of market research with Tradition Energy in Stamford, Connecticut. "They are going to do what they can to protect market share and this is the one tool they have at their disposal."
Brent's premium over U.S. crude futures at one point hit $7.03 per barrel as Brent pared some intraday losses, and on expectations of increasing supply at the U.S. contract's delivery point in Cushing, Oklahoma.
The spread settled at $6.36.
Positive U.S. data released this week may have had the market thinking that the U.S. Federal Reserve will end the program sooner rather than later. That had some traders running for the exits before a policy change weighs on prices, Armstrong said.
U.S. gross domestic product in the second quarter grew by more than double the pace clocked in the previous three months, the Commerce Department said on Thursday, and jobless claims fell last week.
The U.S. Labor Day holiday is on Monday, September 2, and financial markets are closed. (Additional reporting by Anna Sussman in New York, Christopher Johnson in London and Florence Tan in Singapore; editing by Jason Neely, Keiron Henderson, Peter Galloway and Gunna Dickson)