Oil prices slipped below $65 a barrel Thursday as renewed concerns about the severity of a global economic slowdown triggered an exodus of investor capital from stocks and commodities.
By early afternoon in Europe, light, sweet crude for December delivery was down $1.20 to $64.10 a barrel in electronic trading on the New York Mercantile Exchange. Trading was volatile and the contract traded as high as $65.50 and as low as $63.70 earlier in the session.
Oil prices have fallen by about 56 percent since peaking at $147.27 a barrel in mid-July.
In London, December contracts for Brent crude fell 33 cents to $61.57 on the ICE Futures exchange.
Stocks fell throughout Asia and Europe on Thursday, led by Japan's benchmark Nikkei 225 stock average, down 6.5 percent, while Hong Kong's Hang Seng Index slid 7.1 percent.
London's FTSE share index and Germany's DAX were both down 4.6 percent, while France's CAC-40 was 3.8 percent lower.
Markets were following a 5 percent loss in the Dow Jones industrial average Wednesday, a day after Democrat Barrack Obama was elected as the next U.S. president.
"Oil prices are more or less tracking the movements of global equity markets at the moment, as market participants view the indices as a gauge for economic conditions and hence an indicator for future oil demand," said a report from Sucden Research.
Further proof of the scale of the downturn in the world's largest economy came with news that the U.S. services sector, the largest component of the country's gross domestic product, contracted sharply in October as new orders and employment fell.
"The overriding factor is still the gloom in the global economy," said Gerard Rigby, energy analyst with Fuel First Consulting in Sydney. "Oil took sentiment straight from the stock market."
Oil prices overnight fell $5.23 to settle at $65.30 on news of rising U.S. gasoline inventories.
For the week ended Oct. 31, gasoline inventories rose by 1.1 million barrels, or 0.6 percent, which is 1.3 percent below year-earlier levels, the Energy Department's Energy Information Administration said in its weekly report.
Analysts expected stockpiles of the motor fuel to fall by 1.1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Demand for gasoline over the four weeks ended Oct. 31 was 2.3 percent lower than a year earlier, the report said.
Crude-oil inventories remained at 311.9 million barrels, 1.5 percent above year-ago levels. Analysts had expected a boost of 500,000 barrels.
Oil prices will likely see more large swings as investors struggle to gauge the severity of the global economic downturn, Rigby said.
"It's amazing how volatile the market is. It's trying to find its equilibrium," Rigby said. "The reaction to news is extreme."
In other Nymex trading, gasoline futures fell 1.24 cents to $1.412 a gallon. Heating oil dropped 2.53 cent to $2.0294 a gallon while natural gas for December delivery rose 2.3 cents to fetch $7.272 per 1,000 cubic feet.