Oil prices tumbled this evening as traders worried about slumping manufacturing activity in top global energy consumer China, and new tensions over the impact of the euro zone sovereign debt crisis.
Prices continued to fall in afternoon London deals despite signs of stronger-than-expected energy demand in the US, which is the world's biggest oil consumer.
Brent North Sea crude for delivery in January dived $1.88 to $107.15 a barrel. New York's main contract, light sweet crude for January, sank $1.43 to $96.58.
Prices were hit by the stronger greenback, which makes dollar-priced oil more expensive for buyers holding other currencies. The European single currency tumbled today to a new six-week dollar low, as a surprisingly weak German bond sale intensified concerns over the euro zone sovereign debt crisis.
Investors earlier shunned an issue of German 10-year bonds, considered the gold standard of euro zone debt, making bids of only €3.9 billion for the €6 billion of securities on offer.
In addition, sentiment was hit by news that euro zone private sector activity retreated for the third month in a row in November as businesses worry about the impact of the debt crisis on the economy, according to a key survey.
Meanwhile, China's manufacturing activity slumped to its lowest level in 32 months in November, banking giant HSBC said, renewing concerns that the Asian powerhouse is losing steam amid global economic woes.
The preliminary HSBC purchasing managers' index (PMI) dropped to 48 in November - the lowest since March 2009 - compared with 51 in the previous month. A reading above 50 indicates the sector is expanding while a reading below 50 suggests contraction.
And the US government's Department of Energy announced that US crude reserves recoiled by 6.2 million barrels in the week ending November 18, indicating strengthening demand. That compared with market expectations for a gain of 300,000 barrels according to analysts.
The oil market was also dented by weak economic growth data in the US. The US Commerce Department yesterday sharply lowered its third quarter growth estimate for the world's biggest economy to 2% from the 2.5% first stated.
Oil prices had risen earlier this week on worries that the market could tighten after several Western countries imposed economic sanctions on crude producer Iran over its nuclear programme.