Oil fell to the lowest level in more than a year in New York on concern that Greece will default on debt payments, leading to slower global economic growth and lower fuel consumption.

Futures tumbled 2 percent as European finance ministers clashed about expanding the capacity of the European Financial Stability Facility at a meeting today in Luxembourg to determine whether Greece has done enough to mitigate the threat. Oil pared earlier declines after an index of U.S. manufacturing unexpectedly increased in September.

“The worries about Greece and Europe continue to put pressure on oil prices,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The markets are still worried about demand and how what’s going on in Europe is going to affect demand. U.S. data has been a little bit more optimistic.”

Crude for November delivery fell $1.59 to $77.61 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 28, 2010. Prices have dropped 15 percent this year.

Brent oil for November settlement slid $1.11, or 1.1 percent, to $101.65 a barrel on the London-based ICE Futures Europe exchange at 2:30 p.m. in New York. Earlier, it touched $100.71. A close below $101.32 would represent a decline of more than 20 percent from the April 8 settlement price of $126.65 a barrel, meeting the common definition of a bear market.

Greek Measures

The Greek government said today it passed a new budget backed by its international creditors, including larger deficits than previously forecast, as the country moves closer to securing an 8 billion-euro ($10.7 billion) aid payout needed to avoid default.

Prime Minister George Papandreou’s Cabinet also passed 6.6 billion euros of austerity measures yesterday to cut the 2012 deficit to 6.8 percent of gross domestic product, missing the 6.5 percent goal previously set with the European Union, International Monetary Fund and European Central Bank, known as the troika. Finance Minister Evangelos Venizelos previously said Greece would miss the targets.

“Investors in general are very concerned about the economic outlook in both the U.S. and in Europe, with the sovereign debt crisis,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington said on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “The combination of both of these things has been pretty deadly to GDP forecasts.”

Technical Support

New York oil futures may test technical support at around $74 a barrel and $64 a barrel, levels that correspond with the 50 and 62 percent retracement levels on a Fibonacci study from oil’s lows in January 2009, said Stephen Schork, president of Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.

“We’re in a well-defined bearish trend in all commodities, especially crude oil and natural gas, and we’re gunning for a sub-$75 level,” he said.

The Standard & Poor’s GSCI Index of 24 commodities tumbled 0.9 percent to 585.51. Earlier, it touched 580.22, the lowest intraday level since Dec. 1.

Oil also fell as the euro dropped to an eight-month low against the dollar, curbing commodities’ appeal an alternative investment to the U.S. currency. The euro fell 1.2 percent to $1.323 at 2:30 p.m. in New York. Earlier, it touched $1.3222, its lowest level since Jan. 13.

Equities Decline

“Crude oil is still driven to a large extent by the dollar and equities,” said Kyle Cooper, director of research for IAF Advisors in Houston. “Crude and equities are going to go into lockstep as they try to determine whether the U.S. economy is going to back into recession.”

The Standard & Poor’s 500 Index slipped 2.1 percent to 1,107.80, and the Dow Jones Industrial Average decreased 199.65 points, or 1.8 percent, to 10,713.73 at 2:30 p.m. in New York.

Markets rebounded after the Institute for Supply Management reported its U.S. factory index rose to 51.6 in September from 50.6 the prior month. The Tempe, Arizona-based group’s index was forecast to slip to 50.5 based on the median estimate in a Bloomberg survey of economists. A reading of 50 is the dividing line between an expansion and a contraction in manufacturing.

“It confirms that even if U.S. economic growth is slow, it’s still growing,” said Jason Schenker, the president of Prestige Economics, an energy advisory company in Austin, Texas. “This is a step in the right direction but it’s not enough to counter other broad-based concerns.”

Bullish Wagers

Hedge funds cut bullish bets on oil by the most in seven weeks on concern that economic growth will falter. The funds and other large speculators reduced wagers on rising prices by 7.4 percent in the week ended Sept. 27, according to the Commodity Futures Trading Commission’s Commitments of Traders report released Sept. 30. It was the largest decline since Aug. 9.

Oil volume in electronic trading on the Nymex was 609,203 contracts as of 2:33 p.m. in New York. Volume totaled 694,856 contracts Sept. 30, 5.7 percent above the average of the past three months. Open interest was 1.41 million contracts, the highest level since Sept. 15.