Oil prices plunged nearly 8 percent Thursday, tumbling to their lowest level in 10 months as concerns over the European economy sent traders rushing out of oil investments.
"Fear has obviously gripped the market, and we're trading accordingly," analyst and trader Stephen Schork said.
Benchmark crude for June delivery lost $5.34 at $64.53 a barrel on the contract's final trading day on the New York Mercantile Exchange. If that holds, it'll be the sharpest one-day drop since April 2009. Prices tumbled as low as $64.24 earlier in the day, the lowest price for oil since July.
Most of the trading already has moved to the July contract, which lost $3.52 at $68.96 a barrel.
The steep drop in oil prices should give Memorial Day travelers a gift at the gas pump as they head out for the holiday weekend. Gasoline prices dropped Thursday for the 14th day in a row, and they'll be pushed even lower as oil prices continue to tumble.
Futures contracts for most energy commodities slumped as financial troubles in Europe and weak jobs numbers in the U.S. forced a sell-off on Wall Street. The Dow Jones Industrial Average lost about 250 points, or 2.4 percent, in early afternoon trading.
Prices for heating oil, gasoline and Brent crude all dropped by at least 3 percent.
"People are saying it's time to get out," said Michael Lynch, president of Strategic Energy & Economic Research. Earlier this year, Lynch stood out from many of his peers by predicting that oil prices would fall.
"The market has gotten way ahead of itself," Lynch said. "People kept saying that soon demand will go up and inventories will go down. But that's not happening."
Traders started getting nervous as the debt crisis unfolded in Europe. U.S. government data showing that Americans continue to have a relatively weak appetite for fuel have sunk energy prices even further.
An EIA report on Thursday added to those concerns, showing that the country's stockpile of natural gas has ballooned to nearly 17 percent more than the five-year average.
If the world doesn't start sopping up excess supplies, oil prices may fall into the $40-per-barrel range this year, Lynch said.
At the pump, retail gasoline prices dropped 1.2 cents overnight to a new national average of $2.84 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 1.9 cents cheaper than it was a month ago, but it's 50.6 cents more expensive than a year ago.
Experts say gas prices have likely peaked already this year, and it should cost less to fill up this summer than in the summer of 2009. That's good news for the travel industry as Americans get ready to hit the highways over the Memorial Day weekend, the unofficial start of the summer driving season.
On Thursday AAA estimated that more people will take leisure trips during the holiday weekend than last year. About 32.1 million people are expected to head for the highway or the airport. The travel club's report said most people probably will watch their wallets more closely, however, spending about $809 during the weekend this year compared with over $1,000 last year.
In other Nymex trading in June contracts, heating oil fell 7.76 cents to $1.8676 a gallon, and gasoline lost 9.14 cents to $1.9238 a gallon. Natural gas dropped 6.9 cents to $4.089 per 1,000 cubic feet.
In London, Brent crude July contact gave up $2.84 to $70.85 a barrel on the ICE futures exchange.
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