Crude futures ended lower Monday, as worries about China's economic growth and the debt situation in Europe put pressure on oil and other risky assets.
Light, sweet crude for July delivery settled $2.40, or 2.4%, lower at $97.70 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange ended $2.46 lower at $109.93 a barrel.
Oil prices slid from highs above $100 a barrel after manufacturing data in China suggested that the country's ferocious economic growth may be slowing.
A preliminary reading of the HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell to a 10-month low of 51.1 in May from a final reading of 51.8 in April.
Weak data in China combined with renewed fears about the debt crisis in Europe. Investors reacted to a downward revision of Italy's credit outlook by Standard & Poor's over the weekend that built on existing concerns about Greece's sovereign debt.
Traders fled assets dependent on continued economic growth, including equities, oil and metals. The Dow Jones Industrial Average was recently down 0.9% to 12403. The euro fell to two-month lows against the dollar, which helped create a now-common feedback loop where moves in currency and commodities markets feed on each other, leading to large swings.
The dollar's strength comes amid a broad unwinding of long-profitable bets on rising commodities prices and a falling dollar. Commodities, particularly oil, tend to fall when the dollar strengthens, as it makes raw materials more expensive for buyers using other currencies.
"Whatever is going on in the broader economic climate, that's what has been driving what goes on in the energies and in crude oil," said Phyllis Nystrom, an energy analyst with Country Hedging. "The major impact was the higher dollar today."
In the oil market, analysts said any signals that the global recovery is faltering will raise concerns about future oil demand. But large price swings in recent weeks haven't sent prices below $95 a barrel, a level many market watchers say is an important psychological baseline.
"We've seen this so much now, we're almost immune to it," said Carl Larry, director of energy derivatives at Blue Ocean Brokerage. "If you look at the big picture, we're still in the same range."
Oil futures have held between $95 and $105 a barrel since May 5, when commodities plunged across the board.
With few changes to the fundamental picture of oil supply and demand, traders said prices could remain confined to this range until more definitive indications appear about the pace of global growth.
U.S. oil stockpiles are expected to fall by 1.3 million barrels in data due Wednesday from the Department of Energy. Gasoline inventories are seen rising by 400,000 barrels, according to a survey by Dow Jones Newswires. Stocks of distillates, which include heating oil and diesel, are seen rising 300,000 barrels.
Front-month June reformulated gasoline blendstock, or RBOB, settled 0.23 cent higher at $2.9381 a gallon. June heating oil settled 7.12 cents, or 2.4%, lower at $2.8471 a gallon.