Exxon Mobil was down 2% and Chevron fell 2.27% as US crude dropped by more than $1 a barrel to $46.54.
Oil traders decided a sharp drop in US crude stockpiles in the past week - which had eased concerns of oversupply and sent the oil price up on Thursday - would be short-lived.
"One week's worth of data does not make a trend," said IG analyst Bernard Aw.
Bank stocks posted modest gains, although Wells Fargo was down 2% after it was fined $185m for illegally opening accounts to boost sales targets.
In late trading in New York, the Dow was down 1.6%, S&P 1.8%, and Nasdaq 2%.

Dean Holdsworth's Sports Shield consortium and Ken Anderson's Inner Circle bought the club from Eddie Davies earlier this month.
Trevor Birch and Terry Robinson have also left the club, having helped facilitate the sale.
Bolton had a winding-up petition closed at the High Court on Monday after they paid their tax bill.
Warburton said the change of ownership and death of former chairman Phil Gartside last month prompted his decision to leave.
"It has been a privilege to serve on the Bolton Wanderers board for more than 25 years," Warburton told the club website.
"Eddie's decision to sell his shares, coupled with Phil's sad passing, seemed to mark a watershed and the right time for me to stand aside and resign as a director.
"I would like to wish both Ken Anderson and Dean Holdsworth every success as they strive to forge a successful future for this great football club."
Bolton, beaten 6-0 by Bristol City on Saturday, are bottom of the Championship and 12 points from safety with eight matches remaining.

Gray was a Scotland age-grade international and worked for Scottish Rugby in various coaching roles between 1994 and 2006.
He said working with the senior team is "something special indeed".
Head coach Vern Cotter added: "We're looking forward to adding his experience and passion to the group."
Scotland begin the tournament at home to England on 6 February then visit Wales and Italy before hosting France and finishing in Ireland.
Elaborating on his new role, Gray commented: "The defensive breakdown is an area highlighted by the coaches as an area for improvement, for which I've been given a very specific brief to work alongside defence coach Matt Taylor for the seven-week period of the Six Nations.
"It's a great honour and I'm looking forward to joining up with the squad in camp in St Andrews this Sunday."

Ms Rees was selected from an all-woman shortlist drawn up after the former Welsh Secretary said he would stand down at the 2015 general election.
Members of Neath Labour Party made their decision on Saturday.
The other two candidates were Karen Wilkie, deputy general secretary of the Co-operative Party, and Mabel McKeown, a former aide to Harriet Harman.
US stocks edged lower on Wall Street as a 2% drop in oil prices weighed on energy firms.
[NEXT_CONCEPT]
Bolton Wanderers vice-chairman Brett Warburton has resigned following the recent takeover of the club.
[NEXT_CONCEPT]
Richie Gray has joined Scotland's Six Nations backroom staff as a consultant after three years as South Africa's specialist breakdown coach.
[NEXT_CONCEPT]
Bridgend councillor Christina Rees has been picked to succeed MP Peter Hain as the Labour candidate for Neath.