Benchmark West Texas Intermediate crude for September delivery fell $4.31, or 4.7 percent, to $87.62 per barrel in midday trading on the New York Mercantile Exchange. Oil dropped as low as $87.25 per barrel earlier in the day, its lowest level since February.
Brent crude, used to price many international oil varieties, dropped $3.66 to $109.57 per barrel on the ICE Futures exchange in London.
Oil has been sliding as investors focus on a slowdown in the U.S. economic recovery and weaker manufacturing growth in China. A stronger dollar also pushed oil lower on Thursday. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.
"This is going to be a big liquidation day," independent analyst Jim Ritterbusch said. "We've come down so far, so fast, that it seems investors are just looking for an excuse to sell."
Ritterbusch said prices could slip to between $83 and $87 per barrel before trading ends for the day.
The dollar rose Thursday after Japan and Switzerland moved to weaken their currencies. The yen and Swiss franc surged recently as investors worried about slowing economies in Europe and the U.S. sought so-called "safe haven" currencies. As the currencies of those countries strengthened, their goods became more expensive in overseas markets. Switzerland's central bank took steps Wednesday to curb the value of the franc, while the Japanese did the same for the yen on Thursday.
Crude prices have dropped for seven straight days, paralleling a sell-off on Wall Street. The Standard & Poor's 500 index, the Nasdaq and the Dow Jones Industrial Average sank as much as 3 percent on Thursday. The Dow is down more than 1,000 points since July 21.
In other Nymex trading for September contracts, heating oil fell 8 cents to $2.9415 per gallon and gasoline futures gave up 15 cents at $2.7819 per gallon. Natural gas fell 16 cents to $3.931 per 1,000 cubic feet.