Crude fell as much as 2.5 percent in New York as global stock markets dropped. The MSCI World Index lost 2.5 percent in London while Europe's Dow Jones Stoxx 600 Index declined 4.1 percent. Gasoline supplies in the U.S., the world's largest energy user, unexpectedly rose 1.12 million barrels to 196.1 million barrels last week, an Energy Department report showed.
Crude oil for December delivery declined as much as $2.05 cents, or 3.1 percent, to $63.25 a barrel on the New York Mercantile Exchange. It was at $63.57 a barrel at 12:35 p.m. London time.
Crude also fell as the dollar rallied in response to an interest rate cut announced by the Bank of England. A strengthening dollar has tended to coincide with falling oil prices, as commodities lose their appeal to investors as an inflation hedge.
Oil prices, which have tumbled 56 percent since reaching a record $147.27 on July 11, are down 34 percent from a year ago. Yesterday, futures plunged 7.4 percent, the biggest drop since Oct. 10.
The worst financial crisis since the Great Depression has curbed demand, dampened commodities prices and led to a 13 percent decline in the Reuters/Jefferies CRB Index of 19 raw materials in the past month.
Oil has also weakened as refiners' processing profits declined. The profit from making gasoline in the U.S. was at minus $5.04 a barrel and has been negative since Sept. 19.
A slowdown in economic growth in China, India and neighboring countries will reduce travel and cut consumption of diesel, gasoline and jet fuel. Oil demand in Asia including Japan will grow 300,000 barrels a day next year while new refinery capacity is at 1.7 million barrels a day, Merrill said.
Brent crude oil for December settlement fell as much as $1.87, or 3 percent, to $60 a barrel on London's ICE Futures Europe exchange and traded at $60.27 at 12:17 p.m. local time.
Gasoline for December delivery fell as much as 2.4 percent, or 3.4 cents, to $1.3900 a gallon in New York, and last traded at $1.3925 a gallon.