Oil prices tumbled to below $93 a barrel on Thursday due to concerns that U.S. economic growth and crude demand will weaken this year.
By early afternoon in Europe, benchmark oil for August delivery was down $2.50 to $92.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.24 to settle at $95.41 on Wednesday.
In London, Brent crude for August delivery was down $3.34 to $110.87 a barrel on the ICE Futures exchange.
Federal Reserve Chairman Ben Bernanke warned Wednesday that the U.S. economy is weaker than previously forecast, and lowered this year's gross domestic product growth estimate to 2.9 percent from 3.3 percent.
Bernanke also said the Fed doesn't plan to extend a program of Treasury purchases, known as quantitative easing. Analysts credit the policy with boosting monetary liquidity and helping push crude prices higher.
"Without the Fed making extensive asset purchases, we see the engine of inflation stalled out," energy consultant Cameron Hanover said in a report. "That should affect oil prices longer term."
Strong demand from emerging markets helped crude rise to almost $115 early last month. Demand growth in China, the world's second-largest oil consumer, remains robust but has slipped slightly in recent months.
Chinese oil demand rose 8 percent in May from a year earlier, the second month of single-digit growth after expanding more than 10 percent per month between October and March, said Platts, the energy information arm of McGraw-Hill Cos. Crude consumption was also slightly less in May than April, Platts said.
Investors seeking a safe haven helped strengthen the dollar, making crude more expensive for buyers holding other currencies and pushing down oil prices.
The euro dropped to $1.4225 on Tuesday from $1.4376 late Wednesday in New York, while the dollar strengthened to 80.56 yen from 80.32 yen.
Some analysts predict global demand will pick up in the second half and help push crude back above $100.
"We do not expect a near-term recession in any of the large developed or emerging economies," National Australia Bank said in a report. "Stronger growth in private sector demand is expected to further tighten the balance in the oil market, gradually pushing prices higher."
NAB said it expects crude to average $113 in the third quarter.
In other Nymex trading in July contracts, heating oil fell 4 cents to $2.91 a gallon while gasoline dropped 4.0 cents at $2.93 a gallon. Natural gas futures slid 0.7 cents at $4.31 per 1,000 cubic feet.