By early afternoon in Europe, benchmark oil for July delivery was down $1.39 to $89.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 10 cents to settle at $90.76 in New York on Tuesday.
In London, Brent crude for July delivery was down $1.75 at $104.93 per barrel on the ICE Futures exchange.
Crude has plunged 15 percent from four weeks ago on investor fears that political turmoil in Greece could trigger a chaotic exit of that country from the euro common currency.
Over the last week, traders have closely watched Spain's deteriorating economy. On Tuesday, Spain said retail sales dropped 9.8 percent in April from a year earlier while credit ratings agency Egan-Jones cut the country's debt rating for the third time this month.
"Fears of contagion amid Greek and Spanish debt and economic issues will continue to force downward revision in global economic growth and hence world oil demand," energy trader and consultant Ritterbusch and Associates said in a report.
Conflicting reports about a possible €19 billion bailout for nationalized Spanish lender Bankia also set off alarm bells.
The heavy losses were caused by "persistent concerns about the Spain's economic stability," said analysts at Sucden Financial in London.
Europe's wobbly economy has also weighed on the euro, whose drop has pulled oil prices down in recent weeks. A stronger dollar makes commodities priced in dollars, such as crude, more expensive to investors with other currencies.
On Wednesday, the euro was down to $1.2439 from $1.2487 late Tuesday in New York.
Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending May 25 is expected to show a build of 100,000 barrels in crude oil stocks and no change in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Wednesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Thursday. Both reports are being released a day later than usual because of Monday's Memorial Day holiday.
In other energy trading, heating oil was down 3.5 cents at $2.7782 per gallon and gasoline futures fell 3.21 cents at $2.8014 per gallon. Natural gas slid 7.5 cents at $2.410 per 1,000 cubic feet.
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