Oil prices fell below $91 a barrel Tuesday as the initial optimism about Europe's plan to resolve its debt crisis faded, dragging down stock markets and weakening the euro.
By early afternoon in Europe, benchmark crude for December delivery was down $2.53 at $90.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract slipped 13 cents to settle at $93.19 in New York on Monday.
In London, Brent crude was down $1.76 to $107.80 a barrel on the ICE Futures exchange.
Crude has jumped from $75 on Oct. 4 amid expectations of a European plan to contain Greece's debt crisis.
Last week, EU policymakers agreed to lower Greece's debt level over the next decade and also asked bondholders to accept 50 percent losses on their Greek debt, sending stocks and commodities higher. But the plan lacked key details and investors are worried weak economic growth in Europe could undermine fiscal and debt targets.
Monday's revelation by Greek Prime Minister George Papandreou that the country would hold a referendum on the EU rescue plan — which forces Greece to adopt extensive austerity measures — contributed to the gloom.
The news about the Greek referendum "sent shudders through financial markets, reinforcing concerns that the country will not be able to push through austerity plans," said a report from JBC Energy in Vienna.
The euro, which rose above $1.42 last week, was down to $1.3706 on Monday. A stronger dollar often leads to lower oil prices by making crude more expensive for investors holding other currencies.
"The U.S. has its own problems but we'd rather be in dollars and having our fate in the hands of the U.S. president than being in euros and having our fate in the hands of the streets of Athens," said analyst Olivier Jakob of Petromatrix in Switzerland.
Asian and European stock markets were also down sharply, with London's FTSE 100 losing 2.85 percent and Germany's DAX down 4.85 percent.
"Last week's initial market response to the eurozone plan appeared outsized in relation to the limited details that accompanied the announcement and as a result, the markets are retracing much of last week's price up spike," energy consultant Ritterbusch and Associates said in a report.
Traders were also spooked by the bankruptcy of MF Global, a securities firm headed by former New Jersey Gov. Jon Corzine. Rating agencies downgraded the company last week, worried that it holds too much European debt.
Investors are also awaiting new information on U.S. stockpiles of crude and refined products.
Data for the week ending Oct. 28 is expected to show a build of 1.1 million barrels of crude oil stocks, while gasoline stocks are seen falling by 1.5 million barrels, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
In other Nymex trading, heating oil fell 4.85 cents to $3.0098 per gallon and gasoline futures slid 3.04 cents to $2.5753 per gallon. Natural gas lost 6.1 cents to $3.873 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press.