Global oversupply is being compounded by OPEC's failure last week to agree a production ceiling
Oil prices resumed their slide on Tuesday, with US crude falling below $37 per barrel for the first time since early 2009, amid fears the world was running out of capacity to store crude as a global glut intensifies.
The global oversupply is being compounded by OPEC's failure last week to agree a production ceiling, with members Iran and Iraq promising to ramp up output and exports next year.
Benchmark Brent and WTI futures both fell more than 6 percent on Monday, and on Tuesday they hit fresh lows last seen during the credit crunch of 2008/09.
Brent futures were down 60 cents at $40.13 a barrel by 1315 GMT. US crude was trading at $36.86 a barrel, down 79 cents from its last settlement.
"The lower levels are largely the result of a renewed focus on fundamentals now that the bulls' hope for an OPEC cut is off the table," JBC Energy said in a note.
The failure to agree production levels means OPEC core members are readying for new battles for share in the market already heavily oversupplied and consuming almost 2 million barrels per day less than it is producing.
"OPEC has lost control of the oil market and unless something fundamental changes that causes demand to overtake the oversupply in the market, the path of least resistance is the 2008 lows of $35-$38," said Michael Hewson, chief market analyst at CMC Markets.
If Brent falls below $36 per barrel, it would reach levels last seen in 2004 at the start of the so-called commodities super cycle.
Banks such as Goldman Sachs have said oil could fall to as low as $20 per barrel as the world might run out of storage to place unwanted crude. World oil stockpiles are at a record, according to the International Energy Agency.
In yet another indication of fierce market battles, trading sources said Saudi Arabia was shipping more crude oil to Asia over the last two months of the year.
On the demand side, China's crude oil imports for the first 11 months of the year rose 8.7 percent to 6.61 million barrels per day, with November crude imports growing 7.6 percent from the same month a year ago.
China's November sales of new vehicles jumped 17.6 percent over the same period.
With crude prices near record lows, China is seen as likely to double its strategic oil purchases in 2016, adding 70-90 million barrels to its strategic petroleum reserves (SPR).