Oil prices fell below $97 a barrel Monday, echoing a decline in global equities on persistent concerns about the European debt crisis and floundering efforts to cut the U.S. deficit.

By early afternoon in Europe, benchmark crude for January delivery was down $1.13 at $96.54 a barrel in electronic trading on the New York Mercantile Exchange.

In London, Brent crude was down 53 cents at $107.03 a barrel on the ICE Futures exchange.

Borrowing costs for deeply indebted European countries continued to edge higher, while an announcement was expected soon that talks in Washington aimed at reaching a bipartisan agreement on cutting the U.S. government deficit had collapsed.

"The eurozone debt crisis is still weighing on sentiment," said analysts at Commerzbank in Frankfurt. "What is more, talks aimed at trimming the deficit in the U.S. appear to have failed for now, in which case there is a risk of automatic expenditure cuts and, possibly, further rating downgrades from 2013. We therefore initially anticipate further falls in oil prices."

Major equity markets in Europe were mostly down at least 2 percent on Monday, following smaller losses in Asian markets.

Chinese Vice Premier Wang Qishan, who oversees trade and finance, said this weekend that the global economic situation is "extremely serious" and his country would focus on domestic challenges, state media reported.

"In a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time," he was quoted as saying.

The effects of slowing global demand were also evident in Japan, where exports fell for the first time in three months in October.

Crude has jumped from $75 on Oct. 4 on signs the U.S. will avoid a recession this year. However, oil pulled back from a near four-month high above $103 last week as weakness in the global economy came into focus.

"Oil values will continue to be jostled by broad based global economic crosscurrents but with primary focus on the eurozone probably through the rest of this year and beyond," energy consultant Ritterbusch and Associates said in a report. "However, U.S. economic guidance remains positive and emerging markets still appear robust."

The International Monetary Fund in September forecast 4 percent growth for the global economy next year.

In other Nymex trading, heating oil rose 0.27 cent to $3.0352 per gallon and gasoline futures added 1.11 cents to $2.4991 per gallon. Natural gas fell 2.1 cents to $3.295 per 1,000 cubic feet.


Alex Kennedy in Singapore contributed to this report.

Copyright 2011 The Associated Press.