NEW YORK, Aug. 5 (Agencies)-- Oil prices kept falling Tuesday, sinking as low as $118 a barrel on growing concerns that a US economic slowdown and high energy costs are curbing consumer demand for gasoline and other petroleum products.

A pump is pictured in front of the refinery of the Libyan/Swiss-owned Tamoil company in Collombey in southern Switzerland July 24, 2008.

Crude's decline is giving Americans more relief at the pump. A gallon of regular gasoline on average fell another penny overnight to $3.871, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen four straight weeks for the first time in December; prices are off 5.9 percent from their July high as US motorists cut back on their driving to save money.

A day after plunging as much as $5 a barrel in a dramatic sell-off, crude continued its downward trend Tuesday as traders sold oil contracts on the belief that prices are still too high in relation to demand and have further room to fall.

Light, sweet crude for September delivery lost 78 cents to $120.62 a barrel on the New York Mercantile Exchange, after earlier falling to $118, the lowest level since May 5.

Crude has now fallen more than $25 since reaching a trading high of $147.27 on July 11.

"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pa., adding that "$4-a-gallongasoline has clearly killed demand."

On Monday, the Commerce Department said consumer spending after adjusting for inflation fell 0.2 percent in June - the biggest drop since February - as shoppers dealt with higher prices for gasoline, food and other items. Oil prices also fell after Tropical Storm Edouard did not severely disrupt oil and natural gas output in the Gulf of Mexico.

The dollar's gains against the euro also contributed to oil's decline Tuesday. The euro fell to $1.5475 from the $1.5587 it bought late in New York trading Monday, making oil and other commodities less attractive to investors seeking a hedge against inflation and dollar weakness.

In other Nymex trading, heating oil futures rose about half a penny to $3.3558 a gallon, while gasoline prices dropped about half a penny to $2.996 a gallon. Natural gas futures rose 9.7 cents to $8.823 per 1,000 cubic feet.

In London, September Brent crude was down $1.38 to $119.30 a barrel on the ICE Futures exchange.