Benchmark West Texas Intermediate crude lost $1.34, about 1.4 percent, to $98.07 per barrel in New York while Brent crude gave up $1.20, or 1.1 percent, to $107.27 per barrel in London.

Major U.S. stock indexes fell around 2 percent in midday trading, but losses were more severe in Europe.

The European Central Bank cut support for heavily indebted eurozone governments. The ECB has worked to keep borrowing costs low for member countries by purchasing government bonds. However, the bank now says that countries should take a bigger part in getting their finances under control.

Already, cash-strapped countries like Greece have installed severe government spending cuts that are expected to curtail energy demand. Further cuts will reduce demand even more.

Oil prices are reflecting "concerns over a eurozone debt crisis that may already be forcing a recession that could significantly inhibit oil demand," independent oil trader and analyst Jim Ritterbusch said in a research note.

In the U.S., retail gasoline prices fell less than a penny to $3.274 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 71.1 cents cheaper than the 2011 peak price near $4 per gallon, but it's still 30 cents higher than the same time last year.

In other energy trading, heating oil was flat at $2.9111 per gallon while gasoline futures gave up 1.58 cents to $2.5803 per gallon. Natural gas fell by 6.6 cents to $3.251 per 1,000 cubic feet.