Benchmark crude for May delivery fell 22 cents to $85.66 barrel by midday on the New York Mercantile Exchange.
Stocks retreated as investors worried about Greece's debt problems and a disappointing report on unemployment. The Labor Department said initial claims for jobless benefits rose unexpectedly last week. Analysts had expected a drop.
Better-than-expected March sales reports from many retailers did little to keep stocks and oil from sliding.
Oil prices have recently tracked the performance of the stock market, particularly the S&P 500, as crude has become a major investment vehicle for financial companies.
“It's people who move money as opposed to people who move oil that determine what the price of oil will be,” said Tom Kloza, chief oil analyst for Oil Price Information Service.
Kloza said that because financial companies have become major players in oil trading, “we're trading less on merits and more on perception of where the world economy is going (and on) large sweeping views of macro-economic trends.” Crude shot to an 18-month high above $87 this week from $69 in early February on investor optimism that oil demand would increase with a recovering global economy. But US consumption of for oil products has remained weak.
“It appears that this energy rally may have about run its course,” Ritterbusch and Associates said in a report. “We see absolutely nothing bullish about the oil fundamentals.” Meanwhile, the Energy Department reported a 31 billion cubic feet build in natural gas inventories, bringing the already bloated supply to about 1.67 trillion cubic feet for the week ended April 2.
The build was in line with analyst expectations, but traders still moved away from the commodity, sending natural gas prices falling 10.6 cents to $3.913 per 1,000 cubic feet.
In other Nymex trading in May contracts, heating oil lost 0.52 cent at $2.2387 a gallon, and gasoline dropped 1.52 cents to $2.2995 a gallon.
In London, Brent crude was down 41 cents to $85.18 on the ICE futures exchange.
