Light, sweet crude for November delivery was down US$2.44 to US$72.10 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract fell overnight US$4.09 to settle at US$74.54, the lowest settlement price since Aug. 31, 2007.
Oil prices are now half of the peak they reached in mid-July.
"The market is just very worried about a severe international economic downturn," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "They're thinking that oil consumption will be weaker than expected."
Investors were discouraged Wednesday by a U.S. Commerce Department report that showed retail sales dropped in September by 1.2 percent, a sign that turmoil in the credit markets has begun to slow consumer spending. Later in the day, the Beige Book, the assessment of business conditions from the Federal Reserve, said that the economy continued to slow in the early fall.
Japan's benchmark Nikkei 225 stock average was down nearly 10 percent Thursday while the Dow Jones industrials plummeted 733 points Wednesday, or 7.9 percent, it's second-largest point loss ever.
"If we're in the grips of a severe downturn, it's very hard to pick where things will bottom," Moore said. "There's the potential that bad economic news will continue to rattle markets."
Trader and analyst Stephen Schork linked Wednesday's downward turn to macroeconomic trends.
"The Dow tanked and the dollar rallied," he said in his Schork Report.
Investors are beginning to anticipate an output cut by the Organization of Petroleum Exporting Countries at its next meeting in November in a bid to boost prices, Moore said.
OPEC said in a report Wednesday that oil consumption dropped in developed countries by more than 1 million barrels a day in September compared to the same period a year earlier. Demand growth from developing countries increased by a daily 1.2 million barrels over the same time, OPEC said.
"OPEC may try to take some action," Moore said. "It's quite likely they will adjust lower their production targets."
In other Nymex trading, heating oil futures fell by more than 6 cents to US$2.12 a gallon, while gasoline prices decreased by nearly 7 cents to US$1.71 a gallon. Natural gas for November delivery dropped by more than 9 cents to US$6.5 per 1,000 cubic feet.
In London, November Brent crude fell US$2.80 to US$68 a barrel on the ICE Futures exchange.68.0000
Associated Press writer Alex Kennedy contributed to this report from Singapore.