Market was already trading in negative territory after the previous day's record gains
At around 1400 GMT, North Sea Brent crude oil for delivery in November was trading at $65.35 in London, a drop of 5.35 percent compared to Monday's close.
The market was already trading in negative territory after the previous day's record gains that were fuelled by attacks on Saudi facilities which wiped out half the kingdom's crude output.
"The markets were once again wrong-footed by the Saudi news," said Forex.com analyst Fawad Razaqzada in reaction to Tuesday afternoon's price drop.
"This time prices slumped on reports of sooner-than-expected return for oil production after the attacks. Although little details have emerged, speculators are evidently happy to sell now and ask questions later. And who would blame them after that big (price) gap?"
Traders were meanwhile nervously awaiting further US response after it said Iran was likely to blame.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world's top exporter Saudi Arabia as well as other producers.
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