New York's main contract, light sweet crude for delivery in June, sank US$2.34 to close at US$69.94 a barrel, its lowest level since April 13.
The price of London's Brent North Sea crude for June delivery shed US$2.36 to end at US$70.29 a barrel, off a low of US$69.79.
Prices began tumbling after a buoyant weekly stocks report from the US Department of Energy (DoE), which eased concerns about shortages of gasoline in the United States.
"A lot of this was technical selling, prompted by the rise in gasoline inventories and the irreversible drop in demand," Fimat analyst Mike Fitzpatrick said.
"And I think that snowballed and ignited stop-loss orders," he said, referring to technical trades in which investors sell assets automatically once their price drops to a certain level, to avoid further losses.
The DoE added that gasoline or petrol reserves, which are in focus before the US summer driving season, rose by 2.1 million barrels to 202.7 million over the week to April 28.
Reserves of crude oil in the United States, the world's biggest energy consumer, rose by 1.7 million barrels to 346.7 million barrels in the week. Traders had expected heavy falls in both gasoline and crude inventories.
But before the DoE figures were released, the Iranian crisis had driven Brent crude prices to a record level just shy of US$75 a barrel. New York traded near to its all-time high of US$75.35, hit on April 21.
Western powers accuse Tehran of secretly building a nuclear bomb and are seeking UN action against Iran which is the world's fourth-biggest crude producer.
BMO Nesbitt Burns senior economist Bart Melek warned that the slump in oil prices of the past two days could prove short-lived.
"While it is true that US and global stocks are ample, traders should not get too comfortable with the current state of the market as geopolitical realties ... lurking in the background can and likely will send energy prices soaring again," he said.
"Since we don't foresee a quick solution to the Iran problem and we continue to see very healthy demand growth, we call for crude oil to average about 70 dollars per barrel over the next 18 months."
Crude could hit US$100 a barrel in the case of military action against Iran, he cautioned.
European Union finance ministers warned on Thursday that soaring oil prices pose a risk to economic growth and inflation in the 12-nation eurozone, but said the threat has so far been contained.