Crude oil closed below $79 US Thursday for the first time since October.

Benchmark light sweet crude for August delivery closed down 3.9 per cent at $78.27 on the New York Mercantile Exchange.

The drop in oil prices weighed on the Toronto Stock Exchange, which closed down 351 points, or more than two per cent, at 11,408 with the energy index the biggest loser, down more than five per cent. The price is still well above the $60-70 US per barrel range at which Canadian oilsands producers break even.

Crude was selling for as much as $106 in early April.

Prices have been falling as the world economy slows down. America isn't creating as many jobs as hoped, Europe is facing another recession, and manufacturing activity in China appears to have slowed.

The drop in oil prices has made gasoline cheaper. GasBuddy.com, a website that tracks gas prices, said Thursday the national average fell to $1.24 for a litre of regular, down 2.5 per cent from a month ago.

With files from The Associated Press