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The oil spill resulted from an accident on Friday at the Pasir Panjang terminal between a Netherlands-flagged dredger and a stationary Singapore-flagged bunker vessel, Singapore's Maritime and Port Authority (MPA) said.
Waters of three popular beaches on the island "are currently closed for beach clean-up works due to instances of oil spillage observed in the sea waters," the island said in a notice on its website.
Black residue from the oil slick is visible on the beaches, an AFP photographer on the scene said.
One sign put up on a cordoned off beach read "Oil slick spotted. Clean up in progress. Please stay clear of water."
The MPA said patches of oil and light sheens have been observed off Pasir Panjang Terminal and along Tanjong, Palawan, and Siloso beaches.
Sentosa is a popular tourist destination that hosts a casino, Southeast Asia's only Universal Studios attraction and luxury waterfront homes for expats and the ultra-rich.
"Oil spill response craft have been deployed to continue spraying oil dispersants and to collect the oil slicks on the water surface," said the MPA adding that navigational traffic has not been affected.
