Oil dropped more than 3 percent o n W ednesday to the lowest level in nearly six months as fears about the euro zone crisis sparked an erosion in risk appetite across markets.
Prices for Brent and U.S. West Texas Intermediate futures headed toward their biggest monthly drop since the financial crisis of 2008, with U.S. oil breaking below a key technical level as investors headed to safer havens.
Rising borrowing costs for Spain and Italy and the latest poll showing a lead for Greece's left-leaning, anti-austerity parties ahead of next month's election added to concerns about the region's economy.
The crisis, and the potential impact on fuel demand, has helped knock Brent prices off 2012 peaks over $128 hit in early March to near $100 a barrel. Equities and other commodities, including industrial feedstocks platinum and copper, also fell.
U.S. stocks on Wall Street fell more than 1 percent, with European equities also posting sharp losses while benchmark U.S. Treasury yields hit the lowest level in at least 60 years.
"This is about a global slowdown, European concerns, and a lack of liquidity," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.
"Funds have run for the hills, and I believe those were the guys who were propping up the market."
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, tumbled 1.68 percent to the lowest levels since September 2010.
Brent July crude fell $3.21 to $103.47 a barrel, the lowest settlement since Dec. 16. Brent prices are down more than $15 a barrel so far in May, heading for the biggest monthly decline since October 2008, right after the collapse of Lehman Brothers.
U.S. July crude slumped $2.94 to $87.82 a barrel, the lowest settlement since Oct. 21, 2011. Front-month crude prices were headed for a loss of more than 17 percent for May, marking the biggest monthly drop since October 2008.
Wednesday's price slide took U.S. crude below the 61.8 percent Fibonacci retracement of the October to March rally at $88.55 a barrel, a key level of support for technical traders that can intensify selling by triggering stop losses.
U.S. RBOB gasoline and heating oil fell ahead of front-month June contract expirations o n T hursday, with gasoline, which had been trading around the 200-day moving average for the past eight sessions, breaking firmly below that level.
Little fundamental support for crude was seen coming from weekly U.S. inventory data from the American Petroleum Institute and the U.S. Energy Information Administration due out on Wednesday and Thursday, with analysts forecasting a 10th straight week of crude builds for the seven days to May 25.