Oil fell below $70 a barrel on Monday, to its lowest in more than three months, extending a loss of nearly 17 percent over the past two weeks on fears over Europe's debts, the weak euro and swollen US oil inventories.
The euro sank to four-year lows as angst over Europe's debt crisis led investors to pull more money from stocks in favour of havens such as gold and Asian bonds.
US crude for June delivery fell more than $1.00 on Monday to as low as $69.82 a barrel, its weakest since Feb. 5. It was trading at $70.00 by 0645 GMT, down $1.61.
The contract settled down $2.79 on Friday, bringing a two-week tumble to $14.54, or 16.9 percent, the biggest two-week percentage loss since the period ending Jan. 16, 2009.
The contract is expected to face volatility ahead of Monday's June crude options expiry and the May 20 June crude contract expiry.
London Brent crude dropped $1.39 to $76.54 a barrel.
"At the moment all of the markets are on the way of declining further on the euro crisis. I think euro against dollar is possibly to go down to about $1.20, triggering another round of rectification in the market," said Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan.
"Inventories of crude oil and oil products have increased in recent weeks and that's another factor of the bearish mood in the market. Inventories are likely to increase again this week," he added.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract's West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to both more distant futures contracts and the alternative global crude benchmark, Brent.
Qatar expects further pressure on oil prices from the uncertainty engendered by the European debt crisis, its oil minister said on Saturday.
"The oil price is not reflective of demand and supply, but psychological (factors) and uncertainty, especially in Europe (and due to the Greece) bailout," Abdullah bin Hamad al-Attiyah told reporters.
"All this put a lot of pressure on the world economy and the oil price," he said.
The tense mood also hammered Asian stocks on Monday. Japan's Nikkei shed 2.2 percent, South Korea's stock index lost 2.6 percent and Hong Kong's Hang Seng Index fell 2.6 percent.
But the dollar rose 0.69 percent against a basket of currencies. Gold priced in sterling hit an all-time high at 867 pounds on Monday after the British currency struck a fresh one-year low against the dollar.
A strong US currency makes dollar-denominated commodities, such as oil, more costly for holders of other currencies and tends to damp prices.