Oil prices tumbled around 5 percent on Tuesday as the deepening global economic crisis dragged down markets and raised expectations energy demand will slow further.
U.S. stocks tumbled as aluminum maker Alcoa set production cuts and amid fears of a cash drain at automaker General Motors and signs the Chinese economy was faltering.
U.S. light, sweet crude fell $3.08, or 4.9 percent, to settle at $59.33 a barrel after touching $58.32, its lowest since March 2007.
London Brent crude also traded lower.
Economists slashed oil demand expectations due to the economic slowdown in top consumer the United States and Europe.
Some said total global oil demand could contract next year.
"The oil market is coming down into line with demand expectations,'' said Simon Wardell, oil analyst at Global Insight in London. "There's more downside weakness here than upside strength. We are expecting prices to go lower before they go higher with U.S. crude hitting $50 before its reaches $65 again.''