NEW YORK (AP) -- Oil prices plunged in another violent sell-off Friday, briefly tumbling below $78 a barrel as investors grow more pessimistic about the prospects for resolving a mushrooming global economic crisis.
A barrel of oil hasn't been this cheap in 13 months.
The steep losses came as Wall Street extended its staggering decline for an eighth straight day and headed for its worst weekly drop ever. The Dow Jones industrial average was down more than 500 points in mid-afternoon trading.
"Oil is mirroring the stock market right now. There's a total lack of confidence. It's fear driving more fear," said Phil Flynn, energy analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for November delivery fell $8.01 to $78.61 a barrel on the New York Mercantile Exchange, after earlier falling to $77.28, its lowest level since Sept. 11, 2007.
Crude has now lost about 47 percent since hitting a record $147.27 on July 11, tumbling as a deepening credit crisis caused by the subprime mortgage fiasco wreaks havoc around the globe and drives down energy demand.
Investors have shrugged off an array of market-stabilizing efforts by world governments, including a $700 billion U.S. financial rescue plan, several bank bailouts and a coordinated interest rate cut by the Federal Reserve and central banks around the globe.
Underscoring Americans' waning appetite for fuel, a gallon of regular gasoline dropped 5.3 cents overnight to a new national average of $3.35 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express.
Prices dipped below $3 a gallon on average in Kansas, Missouri and Oklahoma. If crude keeps falling, the rest of country should see sub-$3 gasoline in the next few weeks if not sooner, experts say.
Oil market traders were also fixated on signs of falling energy demand around the globe.
The International Energy Agency on Friday cut its global oil demand forecasts for this year and 2009, pointing to the worsening economic conditions and the tight credit supply.
The Paris-based energy watchdog cut its forecast for oil demand this year by 240,000 barrels per day, and slashed its 2009 forecast by 440,000 barrels per day. The IEA now expects global oil demand to total 86.5 million barrels per day this year and 87.2 million barrels per day next year.
"The fundamental game for oil has changed. In the last decade, oil went up because of strong global economic growth. That story for the near term is over, so everybody has to re-evaluate," Flynn said.
Crude's steep losses came despite signs that the Organization of the Petroleum Exporting Countries may tighten output to put a floor under falling prices.
OPEC said Thursday it will hold a special meeting Nov. 18 to discuss how the economic crisis is affecting oil prices, while the head of Libya's national oil company, Shukri Ghanem, called on oil producing nations to cut output.
But analysts doubt an OPEC cut would reverse the extreme downward momentum on oil. OPEC's decision last month to cut production by 520,000 barrels a day failed to halt the losses.
Flynn said another output cut "may actually accelerate the slide."
"What's driving this market right now is fear of demand destruction and lack of credit," he said. "If you can't borrow money to buy crude, then demand falls more and so do prices."
In other Nymex trading, heating oil futures fell 22.06 cents to $2.198 a gallon, while gasoline prices dropped 22.26 cents to $1.8047 a gallon. Natural gas for November delivery fell 26 cents to $6.565 per 1,000 cubic feet.
In London, November Brent crude fell $8.39 to $74.27 a barrel on the ICE Futures exchange.
