PARIS (AP) -- Oil prices tumbled to their lowest in almost a year Tuesday in Europe amid a global sell-off of equities and commodities triggered by investor fears the U.S. will soon fall into recession.
Benchmark oil for September delivery was down $2.12 to $79.19 a barrel in early afternoon time in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract fell to $78.09, the lowest since September 2010. Crude fell $5.57, or 6.4 percent, to settle at $81.31 on Monday.
In London, Brent crude was down $2.05 at $101.69 per barrel on the ICE Futures exchange.
A downgrade of U.S. debt one notch from AAA to AA+ by Standard & Poor's announced Friday sparked investor panic this week. Oil traders often look to equities as a barometer of overall investor confidence, and Monday the Dow Jones industrials plunged 634.76 points, or 5.6 percent, the sixth-worst point decline for the Dow in the last 112 years.
Most European stock markets were sharply lower Tuesday, on the back of steep losses in Asia overnight.
By midday Germany's DAX was down 3.3 percent at 5,724 while the CAC-40 in France was 1.1 percent lower at 3,089. The FTSE 100 index of leading British shares was down 1.8 percent at 4,976.
U.S. stocks were also poised for further falls at the open, a day after the Dow Jones industrial average fell a dizzying 634 points. Dow futures were down another 0.9 percent at 10,625 while the broader Standard & Poor's 500 futures fell the same rate to 1,099.
"It's clear we're entering, or are on the precipice of, another global financial crisis," said Richard Soultanian, an analyst with NUS Consulting. Soultanian expects crude to fall to between $55 and $60 before rebounding to the mid-$70s in the fourth quarter.
Investors will be closely watching the latest consumption forecasts from OPEC and the Department of Energy scheduled to be released later Tuesday. Traders will also be looking to the U.S. Federal Reserve to calm markets and possibly announce another round of monetary stimulus.
The Fed has already twice implemented a program of Treasury bond purchases, known as quantitative easing, since the 2008 financial crisis.
"The way prices are falling, especially on stock exchanges, they are likely to keep falling until the Fed unveils some new program," energy consultant Cameron Hanover said in a report. "There are very few options available, but this is threatening to be a complete meltdown."
Some analysts argue strong crude demand from developing countries such as China should help stabilize oil prices. Most companies and consumers have less debt than two years ago, which should help lower the risk of global economic growth slowing sharply, energy analyst and trader Blue Ocean Brokerage said.
"We can all take a chill pill and understand this is not the recession of 2009," Blue Ocean said in a report. "All of this rumbling that demand can falter from here is (nonsense). The major difference today from 2009, the world is a better place financially."
Lower commodities prices will also lower energy and food costs, freeing up consumer purchasing power and slowing inflation. Asia is a net importer of crude, and lower oil prices should give policymakers in the region more leeway to ease recent monetary tightening.
Crude has fallen 30 percent since reaching nearly $115 in May.
Still, most traders seem to be waiting for selling to subside before jumping back in.
"We have no interest in attempting to catch a falling dagger," energy analyst and trader The Schork Group said in a report. "The adage is to buy when there is blood on the streets, but timing the bottom has led to the demise of traders far greater than ourselves."
In other Nymex trading in September contracts, heating oil rose 0.3 cents to $2.80 a gallon while gasoline dropped 1.2 cents at $2.68 a gallon. Natural gas futures slid 3.9 cents at $3.90 per 1,000 cubic feet.