Oil prices fell sharply for the second straight day on Tuesday, dipping below $70 a barrel as Tropical Storm Ernesto veered away from the oil and gas region of the Gulf of Mexico.

"A lot of people were banking on an active tropical (storm) season and so far it has been nonexistent in relation to platforms in the Gulf of Mexico," said James Cordier, president of Liberty Trading in Tampa, Fla.

With economic growth slowing and U.S. crude supplies plentiful, "we're running out of reasons to buy," Cordier added.

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Light sweet crude for October delivery fell 96 cents to $69.65 a barrel on the New York Mercantile Exchange. The fall extended a $1.90 drop on Monday, leaving oil futures roughly 10 percent below their level of just three weeks ago.

The average retail price of gasoline nationwide has fallen by nearly 20 cents over the past three weeks to $2.85 a gallon.

In other Nymex trading, natural gas futures rose 43 cents to $6.90 per 1,000 cubic feet, while gasoline futures were steady at $1.785 a gallon.

October Brent crude at London's ICE Futures exchange dropped 86 cents to $69.96 a barrel.

Concerns about threats to supply were further eased when BP PLC (BP) said it had restored output from its Prudhoe Bay field in Alaska to about 200,000 barrels a day, half the daily production capacity.

Still, traders remain anxious about Iran's diplomatic stand-off with the West over its nuclear program. They are concerned that Iran, the world's fourth-biggest oil producer, could block oil exports if the United Nations imposes sanctions over its nuclear program. Tehran faces a Wednesday deadline to halt uranium enrichment or face possible economic and diplomatic sanctions, but has so far refused any immediate suspension of its nuclear program.

Iran is a leading global oil exporter and has made threats in recent months to choke off the Strait of Hormuz — where some 20 percent of the world's supply passes through every day — in retaliation for sanctions.

Eurasia Group president Ian Bremmer said Iran is "the single largest political risk" to the oil market in terms of the likelihood that supply could be taken off the market at some point, the near-term timeframe in which something could happen and the potential scale of the impact.

"There are a lot of cards they can play," Bremmer said, including disrupting oil production and transport in southern Iraq and taking a small amount of their own oil off the market.

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