Oil futures continued lower after setting new contract highs earlier this morning on the back of multiple explosions on the London transport network.
At 12.03 pm, US benchmark August-dated contracts were down $2.18 usd at $59.20 of an earlier record high of $62.10 a barrel.
In London, August-dated Brent futures contracts were down $2.21 at $57.64, off this morning's earlier record of $60.70 a barrel set just after 9am.
"The spike was an irrational knee-jerk reaction to a series of explosions, which all point towards a terrorist attack," said Investec analyst Bruce Evers.
The oil market was also nervous as tropical storm Dennis, now upgraded to hurricane status, hurtled towards the US oil producing region, which added to the buying frenzy earlier, Evers added.
Weather reports said that the hurricane could become even stronger. Dennis is expected to arrive in the primary US oil producing region, the Gulf of Mexico, over the weekend.
The US National Weather Centre warned: "Dennis could become a strong category 2 hurricane by the time it reaches Jamaica later today."
Separately, tropical storm Cindy came inland over the central Louisiana coast overnight and has already forced the shutdown of around 3 per cent of US Gulf production capacity, analysts noted.
The memories of last year's devastation caused by hurricane Ivan are all too clear in people's minds. US domestic oil production did not fully recover in the region for several months, Informa Global Markets analyst Peter Luxton noted.
Disruption to Gulf output and concern that the storms will affect southern US refinery output has stoked market concern about an already-stretched supply chain.
"Earlier, prices had lost $4 a barrel. It looked as though prices had collapsed. Many had bailed out on fears of a post-September 11-style recession," said Luxton.
Separately, US weekly inventory data will be released at 3.30pm London time.
"If the distillate result is short of the 1.5 million barrel increase prediction then prices could go higher still," Luxton said.
Separately, there has been no reaction to the record highs from OPEC. Informa's Luxton said: "They did say last week that if prices remains high (above 60 usd) then they will put on extra production, but nothing has emerged so far."