Light, sweet crude for December delivery fell 77 cents to settle at $53.62 a barrel on the New York Mercantile Exchange, about where prices were in January of 2007.
Macro forces drove falling crude prices Wednesday, said Fred Rozell, retail pricing director at the Oil Price Information Service, with investors selling off in a "herd mentality," much as they crowded into the market over the summer.
Consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount.
The Labor Department said Wednesday that consumer prices fell by 1 percent last month, the biggest one-month decline on records that go back to February 1947. The drop was twice as large as the 0.5 percent decline analysts expected.
For October, energy prices fell by a record 8.6 percent, led by a 14.2 percent drop in gasoline prices, also a record. With no definitive signs that the economy is stabilizing, industry analysts expect energy prices will continue to fall.
The nationwide average for regular gasoline is now $2.07, down 33 cents since the start of the month, according to the Energy Information Agency, and well below record-highs above $4 per gallon this summer.
Also dampening energy prices was more bad news from the housing industry.
Construction of new homes and apartments fell by 4.5 percent in October to an annual rate of 791,000 units, the Commerce Department reported. It was the slowest construction pace on records going back to 1959.
Supply disruptions that once roiled markets have not slowed crude's decline as falling demand has supplanted supply issues as the gravitational force on Nymex.
"Even reports of renewed rebel activity in Nigeria are not enough to spur a rally," Addison Armstrong, director of market research at Tradition Energy, said in a morning note.
Chevron Corp. invoked "force majeure" Tuesday on 90,000 barrels a day of its Nigeria gross production after a pipeline was breached by militants in the Niger Delta.
Investors also brushed off the hijacking of a Saudi supertanker carrying $100 million in crude this week. That ship is still under the control of Somalian pirates who are seeking a ransom. Oil prices have fallen 63 percent since reaching a record $147.27 a barrel in mid-July.
Crude, at least so far this week, is not posting the huge price swings that have dominated the market for the past month.
"Market sentiment is still bearish, but not as bearish as a week ago," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "Volatility has come down and the market is consolidating a bit."
The Energy Department's Energy Information Administration reported Wednesday that crude inventories rose by 1.6 million barrels last week to 313.5 million barrels after stagnating in the prior period.
Analysts had expected a boost of 1.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The one strong point in energy markets were distillates such as heating oil.
With winter cold reaching into the Northeast, inventories of distillate fuel fell by 1.5 million barrels to 126.9 million barrels for the week ended Nov. 14. Analysts expected distillate stocks to rise by 900,000 barrels.
Yet gasoline inventories rose by 500,000 barrels, or 0.3 percent, to 198.6 million barrels, which is 1.3 percent below year-ago levels. Analysts expected stockpiles of the motor fuel to rise by 700,000 barrels.
Demand for gasoline over the four weeks ended Nov. 14 was 2.2 percent lower than a year earlier, averaging 9 million barrels a day, the EIA said in its weekly report. Compared with summer highs, that has lead to huge breaks at the pump, with average gasoline prices below $2 in a handful of states, from Texas to Minnesota.
Stock markets have served for the past few months as a barometer in crude traders about the health of the global economy.
Wall Street turned sharply lower Wednesday, as a bailout of Detroit's Big Three automakers appeared stalled on Capitol Hill, and another round of downbeat economic news further disheartened investors. The Dow Jones industrials fell more than 400 points.
Markets overseas fell as well. Japan's benchmark Nikkei index fell 0.7 percent, Hong Kong's Hang Seng index dropped 0.5 percent and the Korea Composite Stock Price Index slid 1.9 percent. European markets also fell across the board.
Oil investors have already priced in a recession in developed countries and only evidence of an especially severe or prolonged slowdown may push prices down further, Chu said.
Analysts suggested that prices might be bottoming out as they moved closer to the psychologically significant $50 mark. "I don't see oil falling below $50," Chu said. "It should be above $60 in a couple weeks."
The Organization of Petroleum Exporting Countries is holding an informal meeting later this month ahead of its regular December meeting. OPEC President Chakib Khelil has said the group will wait until the effects of a 1.5 million-barrel-per-day production cut plays out and that another cut on Nov. 29 is unlikely.
More hawkish OPEC members like Iran have called for immediate production cuts and some analysts believe they may get them if oil falls below $50.
In other Nymex trading, gasoline futures slipped about 3 cents to settle at $1.107 a gallon. Heating oil rose less than a penny to settle at $1.7597 a gallon while natural gas for December delivery jumped 22.7 cents to settle at $6.743 per 1,000 cubic feet.
In London, January Brent crude fell 12 cents to settle at $51.72 on the ICE Futures exchange.
Associated Press writers George Jahn in Vienna, Austria, and Alex Kennedy in Singapore contributed to this report.