Prce has fallen more than 25% so far this year, the steepest such slide since the financial crisis
US oil prices crashed below $27 dollars a barrel on Wednesday for the first time since 2003, caught in a broad slump across world financial markets with traders also worried that the crude supply glut could last longer.
Oil has fallen more than 25 percent so far this year, the steepest such slide since the financial crisis, piling more pain on oil drillers and producing nations alike. Yet they keep pumping more oil into an oversupplied market.
Venezuela requested an emergency OPEC meeting to discuss steps to prop up prices, but other delegates dismissed the idea. A UAE shipping firm became one of the first to resume direct business with Iran after international sanctions on Tehran were lifted at the weekend, a reminder of how quickly more oil may flow.
"The Iranians are clearly stepping it up to battle for market share in Europe," said John Kilduff, partner at Again Capital in New York. Not only is that a major market for Saudi Arabia and Russia, but US oil is now flowing unfettered to Europe for the first time, "so it's a battle royale."
US crude for February delivery, which expired at the end of the day, slid $1.91, or 6.7 percent to settle at $26.55. New frontmonth March futures fell nearly 4 percent on the day to close at $28.35 a barrel.
Brent futures for March delivery fell 77 cents to settle at $27.88 a barrel, a 2.7 percent loss after pulling back from a new contract low of $27.10.
The latest step lower, the 11th decline in 13 days for Brent, set off a new round of panic buying on bearish options, sending the oil volatility index to its highest level since early 2009 when the financial crisis was starting to ebb.
Schieldrop, chief commodities analyst with SEB in Oslo, said a "very broad-based sell-off across assets and across the world" amplified pressure on oil prices.
World equities sank to their lowest level since 2013. The MSCI World Equity Index has dropped 11.1 percent in January, which if sustained would be the worst monthly loss since October 2008, the month after Lehman Brothers went bankrupt.
On Tuesday, the International Energy Agency warned that the world could "drown in oversupply" of oil in 2016, with the lifting of sanctions against Iran allowing that country to add its exports to the global glut.
The selloff triggered a further slide in shares of big U.S. shale drillers, as investors feared much of the sector would struggle to withstand a prolonged period with prices below $30. Continental Resources dropped more than 8 percent.
But oil prices may keep falling until traders see they are "slow(ing) down shale much faster," said Bjarne, referring to the desire of Saudi Arabia and other OPEC producers to protect market share from U.S. shale producers.
Energy market watchers expect the global crude glut to persist through at least the end of this year, adding to stockpiles that in some places are testing tank limits.
US commercial crude oil stocks are forecast to have risen by 3 million barrels last week. Data from the American Petroleum Institute, a US industry group, was due later on Wednesday.