NEW YORK (AP) — The price of oil is headed for its biggest monthly decline since December 2008.

Benchmark U.S. crude has dropped nearly 16 percent so far in May. There are growing expectations that the world won't use as much oil this year as previously expected. On Wednesday, the futures contract fell $2.99, or 3.3 percent, to $87.78 in afternoon trading in New York as global stock markets also sank.

Europe's financial crisis is the most immediate concern, but there have been plenty of signs of weaker demand.

Analysts point to weak U.S. jobs numbers and a slowdown in China's manufacturing sector. The U.S. and China are the biggest oil consumers in the world.

Earlier this year, energy economists mostly agreed that world oil demand would hit a new record in 2012, probably around 89 million barrels per day. But with demand not growing in China and declining in the U.S., those expectations are starting to change.

"I wouldn't be surprised if demand was lower this year," said Michael Lynch, president of Strategic Energy & Economic Research.

Experts also are concerned by a banking crisis in Europe that may pull the eurozone into recession. The European Commission added to those concerns Wednesday, reporting that economic confidence has plummeted this month to the lowest level in two and a half years.

Fears about Europe's financial stability sent ripples through world markets. Major stock indexes slipped 1 percent to 2 percent.

The euro fell near a two-year low against the dollar, helping to push oil prices even lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for investors holding foreign money.

Brent crude, which is used to price oil varieties that are imported into the U.S., fell by $3 to $103.68 per barrel in London.

In other futures trading, heating oil lost 6.4 cents to $2.745 per gallon while wholesale gasoline lost 5.7 cents to $2.85 per gallon. Natural gas fell by 7.7 cents to $2.408 per 1,000 cubic feet.