Oil prices slid alongside global stock indexes Monday with Europe's economic stability again under intense scrutiny.
Benchmark West Texas Intermediate crude lost $1.64, about 1.7 percent, to end the day at $97.77 per barrel in New York. Brent crude, which is used to price foreign oil varieties imported by U.S. refineries, gave up $1.39, or 1.3 percent, to finish at $107.08 per barrel in London.
Major U.S. stock indexes fell around 2 percent in midday trading, but losses were more severe in Europe.
The European Central Bank cut support for heavily indebted eurozone governments. The ECB has worked to keep borrowing costs low for member countries by purchasing government bonds. However, the bank now says that countries should take a bigger part in getting their finances under control. Already, cash-strapped countries like Greece have installed severe government spending cuts that are expected to curtail energy demand. Further cuts will reduce demand even more.
Oil prices are reflecting "concerns over a eurozone debt crisis that may already be forcing a recession that could significantly inhibit oil demand," independent oil trader and analyst Jim Ritterbusch said in a research note.
Besides cutting into energy demand, Europe also is a major importer of manufactured goods. If its economy continues to sputter, it will hurt other countries such as China and the U.S.
"The concern is how this feeds back into the rest of the economy," said Michael Lynch, president of Strategic Energy & Economic Research. "You have to wonder how much a weak Europe makes things worse."
European leaders want to fix the economy with a new treaty that would require balanced budgets and an agreement to tie their finances closer together. Britain has refused to consider it, however, raising doubts that the plan will be installed. Meanwhile, credit ratings agencies Moody's and Fitch have warned that the new deal doesn't properly address the central economic challenge in the region, which is to lower debts.
Moody's on Monday said credit ratings for European countries could be cut in coming months, echoing an earlier warning by Standard and Poor's.
The European financial crisis also has propped up the value of the dollar recently. That tends to push oil prices even lower. Oil, which is priced in dollars, usually falls as the dollar rises and makes crude barrels more expensive for investors holding foreign money.
In the U.S., retail gasoline prices fell less than a penny to $3.274 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 71.1 cents cheaper than the 2011 peak price near $4 per gallon, but it's still 30 cents higher than the same time last year.
In other energy trading, heating oil lost 1.64 cents to finish at $2.8961 per gallon while gasoline futures gave up 3.25 cents to end at $2.5636 per gallon. Natural gas fell by 6.3 cents to finish the day at $3.254 per 1,000 cubic feet.