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NEW YORK (CNNMoney.com) -- The price of oil fell on Monday as fresh signs of economic weakness stoked concerns about waning energy demand worldwide.

Light, sweet crude for December delivery fell $3.90 to settle at $63.91 a barrel on the New York Mercantile Exchange.

The oil market was pressured by a report showing that U.S. manufacturing activity sank to a 26-year low last month and fell below the level consistent with recession.

The Institute for Supply Management's manufacturing index tumbled to a reading of 38.9 in October from 43.5 in September. It was the lowest reading since September 1982. A reading of 41 is considered a sign of recession.

"The ISM report was very disappointing," said Phil Flynn, senior market analyst at Alaron Trading in Chicago.

Flynn said weakness in manufacturing is particularly alarming for oil traders because "as goes the manufacturing industry, so to goes oil demand."

At the same time, a grim outlook for economic growth in Europe also weighed on oil prices.

The European Commission is forecasting that the economies of the 15 countries that use the euro will barely grow next year as the financial crisis takes its toll on Europe.

The December oil contract had gained $1.85 to settle at $67.81 a barrel Friday.

But Friday's advance did little to offset record losses in October. Crude oil prices fell 32.6% last month, the largest percentage since Nymex trading began in 1983, according to the U.S. Energy Information Administration.

Dollar and stocks: In addition to the dour economic data, oil was pushed lower by a resurgent dollar.

The U.S. currency was higher against major currencies, adding to its 9% rise in October against both the euro and the British pound.

Many investors buy crude futures when the dollar weakens to hedge against inflation and sell those futures when the dollar rebounds. And a more robust buck makes crude a less attractive investment for overseas buyers.

Monday's retreat in the oil market came despite a rally in Asian stock markets and moderately higher stock prices in Europe and the United States.

Oil investors have been using global stock markets as a gauge for the overall health of the economy and future energy demand.

But the weak U.S. manufacturing report coupled with the EU's grim assessment of future economic growth appeared to outweigh gains in the stock market.

The market is also awaiting the results of Tuesday's U.S. presidential election.

Analysts say that market participants will be glad to have the election over, eliminating one source of uncertainty, regardless of whether Republican John McCain or Democrat Barack Obama wins the election.

"It would take a surprise upset for the market to rally," Flynn said.

Gasoline: Retail gas prices fell 2 cents overnight, marking the 47th consecutive day of declines.

The national average price for a gallon of regular gasoline dropped to $2.415 from the previous day's price of $2.436, according to a daily survey by the American Automobile Association.

Over the last 47 days, gas prices have decreased by $1.44, or 37.4%. Prices are down more than 41% since the summer's spike above $4 a gallon.

Auto sales: The beleaguered auto industry is reporting October sales numbers that are on track to be the worst in 16 years.

Ford's (F, Fortune 500) October sales were down 30% from year earlier when its Volvo unit was included in the sales total. The results were up slightly from September, which was the weakest month for the company since January 1982.

Rival automaker General Motors (GM, Fortune 500) said sales were down 45% in October from a year ago.

But the sales declines were not limited to Detroit. Toyota Motor (TM), which is now the No. 2 automaker in terms of U.S. sales, posted a 23% decline from year-earlier levels. That was far worse than the 16% drop forecast by Edmunds.

Auto sales suffered despite significantly lower gas prices in October. A lack of available credit and plunging consumer confidence kept potential buyers out of dealer showrooms.