Oil was poised for the biggest monthly drop in more than three years in New York on speculation Europe’s worsening debt crisis and a sputtering U.S. recovery will reduce fuel demand.

Crude fell as much as 0.8 percent after losing 3.2 percent yesterday, the most since May 4. European inflation slowed more than economists forecast this month, cooling to the least in more than a year as the economic slump showed signs of deepening. Oil closed yesterday 20 percent below this year’s highest settlement of $109.77, a movement that often defines a bear market. The number of Americans applying for unemployment insurance payments rose last week to a one-month high, a sign that progress in reducing joblessness may be stalling.