Oil prices have dropped below $70 a barrel on news that militant leader Abu Musab al-Zarqawi was killed in Iraq.
Iraqi insurgents have targeted the country's oil infrastructure
In New York, the benchmark contract of light sweet crude fell as low as $69.35 a barrel before rebounding to close cents higher at $70.44.
In London, a barrel of Brent crude fell 14 cents to $69.05.
Prices had already been sliding after a report showed healthy US oil stocks and there was optimism political tensions between Iran and the US were easing.
On Wednesday, former US central bank chief Alan Greenspan had warned that oil prices were hurting the US economy.
Jordanian-born Zarqawi was seen as the leader of al-Qaeda in Iraq, and a figurehead of the Sunni insurgency. His group has been blamed for - and claimed - numerous bombings and kidnappings of both Iraqis and Westerners.
"The hope is that with the removal of the terror leader in Iraq, the Iraqi situation will stabilise faster and future oil supply could increase," said Victor Shum, an energy analyst with Purvin & Gertz.
However, some analysts questioned whether the death of Zarqawi would in fact weaken the insurgency in Iraq.
According to Mike Guido, an analyst at Societe Generale, the death of Zarqawi "seems to be more of symbolic accomplishment".
Edward Meir of MAN Financial warned that "the situation in Iraq has now become so chaotic, that it transcends the death of one man, influential as Zarqawi was."
"The price decline we are seeing today may therefore be limited in scope after the initial selling is over," Mr Meir added.
The insurgents had frequently targeted Iraqi oil installations, and Iraqi oil output has still not recovered to anywhere near the level the government was hoping for.