The wild swings have traders asking where the bottom is.
Carl Larry, the director of research and derivatives at Blue Ocean Brokerage, said he believes oil will hold the $80-a-barrel level and recover, since supplies are tight even as demand is slack, and as traders lock in the low price through derivative hedges. Still, he acknowledged the price has fallen through previous support levels, and could go further south as investors feel around for the bottom.
"The big problem is all this instability, with Congress, with the Fed, nobody here is on the same page," he said. "When nobody knows where the floor is, or what solid ground is, people are just not sure what the solution is. Everyone's running out of answers, so that instability could cause this market to come down a little bit more."
The dollar rising 0.8% to 78.333 on the ICE Dollar Index contributed to oil's decline. A rising dollar can drive crude prices lower, as the dollar-denominated commodity becomes more expensive for holders of other currencies.
Front-month October reformulated gasoline blendstock, or RBOB, was down 10.65 cents, or 3.9%, to $2.5600. October heating oil fell 8.57 cents, or 2.9%, to $2.8485 a gallon.
--Jerry DiColo contributed to this article.