(AP) -- Oil prices plunged over $3 Thursday, briefly dipping below $50 a barrel as 16-year high U.S. unemployment figures and plummeting stock markets caused investors to price in lower crude demand.
Light, sweet crude for December delivery was down $3.25 to $50.37 a barrel in electronic trading on the New York Mercantile Exchange by early afternoon in Europe.
Crude briefly dipped below $50 for the first time since Jan. 18, 2007 when prices struck $49.91, just a penny above the 2007 low.
On Wednesday, the contract fell 77 cents to settle at $53.62.
In London, January Brent crude fell $2.89 to $48.83 on the ICE Futures exchange.
Markets worried that a steep economic slowdown would cut demand for oil.
"People are saying this slowdown could be the worst since the Great Depression," said Toby Hassall, an analyst with investment firm Commodity Warrants Australia in Sydney. "There's definitely fear out there that it's going to be pretty severe."
There was bad economic news Thursday out of the U.S., with new claims for unemployment benefits jumping last week to a 16-year high, providing more evidence of a rapidly weakening job market expected to get even worse next year.
The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That's much higher than Wall Street economists' expectations of 505,000, according to a survey by Thomson Reuters.
That is also the highest level of claims since July 1992, the department said, when the U.S. economy was coming out of a recession.
Concerns that Congress may not approve a $25 billion rescue package for ailing U.S. carmakers General Motors Corp., Ford Motor Co., and Chrysler LLC helped drag the Dow Jones industrial average down 5.1 percent Wednesday to its lowest level since March 2003.
"The downturn in equities is driving an overall lack of confidence," said Olivier Jakob of Petromatrix in Switzerland.
Stocks slid sharply Thursday in Asia and Europe. Japan's benchmark Nikkei index fell 6.9 percent and Hong Kong's Hang Seng index was off 4 percent. London's FTSE index was down 2.5 percent, Germany's DAX index lost 2.8 percent and France's CAC-40 shed 3.5 percent.
"The stock markets are representing investor pessimism regarding the economic outlook and what we have in store over the next year," analyst Hassall said.
On Wednesday, the U.S. Department of Transportation provided more evidence that the slowdown continues to hurt gasoline consumption, even as prices fall. Americans drove almost 11 billion fewer miles in September, the department said.
A production cut by OPEC may keep prices from falling further. The Organization of Petroleum Exporting Countries is holding an informal meeting later this month ahead of an official meeting in December. OPEC President Chakib Khelil has signaled the group may announce production cuts at the December meeting, but some members, such as Iran, have called for earlier cuts.
"It's gonna take a pretty big supply side response from OPEC at their next meeting to provide some support," Hassall said. "The focus of the market is definitely on the demand side."
Investors have been brushing off news that earlier in the year would have sent prices higher. Chevron Corp. invoked "force majeure" Tuesday on 90,000 barrels a day of Nigerian production after a pipeline was breached by militants in the Niger Delta. Earlier this week, Somali pirates hijacked a Saudi supertanker carrying $100 million in crude.
In other Nymex trading, gasoline futures fell 7.30 cents to $1.034 a gallon. Heating oil lost 5.33 cents to $1.7064 a gallon while natural gas for December delivery slid 9.9 cents to $6.644 per 1,000 cubic feet.
Associated Press writers Alex Kennedy in Singapore and Christopher S. Rugaber in Washington contributed to this report.