Oil fell to around $64 a barrel on Monday and touched a five-week low, pressured by doubts over the prospects for a recovery in the global economy and energy demand.
The U.S. jobless rate reached a 26-year high and Euro zone unemployment is at the highest in a decade, reports showed last week. Oil fell even after militants attacked oil installations in major African exporter Nigeria.
There's a general retreat caused by lack of risk appetite, said Mike Wittner, oil analyst at Societe Generale. For a couple of months, we perhaps got a bit too optimistic and several markets got ahead of themselves.
U.S. crude fell $2.88 from Thursday's close to $63.85 a barrel by 1214 GMT. It traded as low as $63.40, the lowest intraday price since May 28. Brent crude fell $1.85 from Friday's close to $63.76.
European stocks weakened on Monday following on from losses in Asia. U.S. stock futures pointed to a lower opening on Wall Street. The dollar rose against a basket of other major currencies.
It's a definite break to the downside, probably sparked by the poor economic data and stalling stock markets, said Christopher Bellew, a broker at Bache Commodities in London.
It's completely broken through its support at around $68.00-$68.50 and technically and probably fundamentally, heading lower now, he added, referring to Brent crude.
NYMEX floor trading was closed on Friday because of the U.S. Independence Day holiday and, although oil traded electronically, the exchange did not issue an official closing price.
Investors will focus later this week on a meeting of the Group of Eight industrial nations on July 8-10.
The G8 should not presume a global economic recovery is near, World Bank President Robert Zoellick said in a letter to G8 host Italian Prime Minister Silvio Berlusconi obtained by Reuters on Monday.
In a research note, Societe Generale said the correction in oil prices, which surged 42 percent in the last quarter, was long anticipated. It predicted oil prices would continue falling and average around $60 a barrel in July.
Even after its latest losses, oil has still almost doubled from a low of $32.40 reached in December. Attacks on oil installations in Nigeria, traditionally Africa's top oil producer, could limit losses.
Chevron, Royal Dutch Shell and Italian energy firm Agip have cut oil output by around 273,000 barrels per day in the last six weeks following the latest campaign of militant violence.
(Additional reporting by Fayen Wong in Perth; Editing by Anthony Barker)