Benchmark crude fell $2.64, or 2.8 percent, to $90.55 per barrel in New York, while Brent crude lost $1.80 at $107.76 in London.
Prices dropped after Greece's prime minister called a referendum in his country on Europe's debt deal. If Greeks reject the debt deal, it would increase the chances the country would default on its debt. That would weaken banks in surrounding countries and slow down the European economy.
Stocks sold off, with the major indexes down about 2 percent.
In the U.S., a private survey showed that manufacturing grew last month, but at a slower pace than in September. Manufacturing activity has grown for 27 straight months, according to the Institute for Supply Management. The September reading indicated that factories are struggling to expand in a weak economy.
Construction spending also rose slightly in September. At $787.2 billion, it's barely half of what economists consider healthy.
Meanwhile, U.S. retail gasoline prices fell less than a penny to a national average of $3.437 per gallon, according to AAA, Wright Express and Oil Price Information Service.
In other energy trading, heating oil fell 6 cents, or 2 percent, to $2.9972 per gallon while gasoline futures fell 4 cents to $2.5637 per gallon. Natural gas lost 16 cents at $3.777 per 1,000 cubic feet.