In the US - the world's biggest consumer - crude for November delivery at one point last week dropped below the psychologically important US$90 pricing level, raising fears that a prolonged slump could put many of America's shale drillers out of business. Shale oil, which can cost up to US$80 a barrel to produce, has spurred an energy revolution in the US, which has started to threaten the dominance of producers in the Middle East.
However, at current price levels many of these new so called "tight oil" wells are approaching the point when they will soon become unprofitable.
All eyes are now firmly focused on the next move by Opec, which controls 60 per cent of the world's oil reserves and about a third of daily physical supply. The group has been branded an unaccountable "cartel" by free-market critics in North America who claim its system of limiting production by setting an output ceiling and quotas is tantamount to price rigging.
Although this is an accusation that the group's secretariat, which is based in Vienna, strongly denies, its mostly unelected group of policymaking oil ministers undeniably pull the strings of the global energy industry in the same way that central bankers can control currencies.
Opec states have largely managed to maintain cohesion over the past decade as prices over US$100 a barrel have enriched their economies and encouraged adherence to quotas. This consensus is now starting to break down.
Next month's meeting promises to be the most tense held since the onset of the Arab Spring in 2010, with the Shi'ite Muslim faction of Iran and Iraq already appearing to line up against Saudi Arabia and the United Arab Emirates (UAE).
Iran's Oil Minister Bijan Zanganeh has placed his cards on the table early by calling for Opec to urgently cut output to stem the sharp recent decline in prices, which threatens the Islamic Republic's fragile economy after years of restrictive sanctions.
According to research from Deutsche Bank, Iran has the highest fiscal break-even price for its budget at over US$130 per barrel of Brent, compared with the UAE at around US$70 per barrel and Saudi Arabia at about US$90.
However, the Gulf's Arab states are all sitting on huge cash piles that are held overseas through sovereign wealth funds and foreign currency assets that can be drawn upon to help them weather any short-term drop in oil export revenues.
Iran, possibly supported by Iraq, will push hard for a change in Opec's production targets at the meeting and a cut to its overall output by 500,000 barrels per day (bpd) from the 30 million bpd limit that it currently sets for members. The latest figures suggest that level has already been breached with Opec members perhaps pumping as much as 1 million bpd above the group's agreed quota.
"Considering the downward trend in prices, Opec members should try to temper production to avoid further price instability," Mr Zanganeh was quoted saying by Iranian state media at the end of last month, even before crude fell to its current lows.
Mr Zanganeh is at odds with his most powerful rival in Opec, Saudi Arabia's influential oil minister, Ali Naimi, who has so far dismissed calls for an emergency meeting to be held ahead of November. Nevertheless, the kingdom has taken the precaution of trimming its own output and reducing the price of crude it offers to customers in Asia in an apparent move to defend its market share.
Demand for crude normally spikes during the northern hemisphere's winter season and some Opec officials have argued that the group should wait to see if there is a repeat of the "polar vortex" conditions that shut down the eastern seaboard of the US and led to a brief contraction in the economy in the first quarter.
Saudi enjoys some of the lowest production costs, excluding capital expenditure on new projects, in the region of US$2 a barrel, giving it a large margin to soak up a sudden drop-off in price. This compares with estimated production costs in the North Sea which are in the region of US$50 a barrel, according to Oil & Gas UK figures.
To further complicate the forthcoming meeting, Arab Gulf states remain deeply suspicious of Iran as the leadership in Tehran edges towards a settlement with Western powers over its nuclear programme. An end to Tehran's economic isolation could trigger the opening up of its oil industry to foreign investment, a move that would bring more crude on to an already flooded market.
Iran is currently producing around 3 million bpd of crude but it is thought with access to Western technology this figure could be easily doubled. Combined with Iraq, which aims to eventually increase production capacity to as much as 9 million bpd by the end of the decade, both countries could challenge the current dominant position of Saudi Arabia and the Arab Gulf states within Opec.
The looming issue of global over-capacity has been further complicated by the sudden return to the market of light, sweet Libyan crude. In the background is the surge in US shale oil production and the mounting pressure on President Barack Obama to lift the US crude export ban that has been in place since the 1970s to guarantee America's energy security.
Fracking has helped the US achieve its highest oil production levels since 1986 over the last two months at a rate of 8.5 million bpd. The threat of a full lifting of the ban on exports has also helped the US to drive down the price and potentially cripple the Russian economy. Moscow is largely dependent on crude sales for foreign currency earnings and oil trading at around US$80 a barrel for some months could bring the country to its knees.
Deutsche Bank estimates that if Opec fails to cut production in response to falling oil prices then around 9 per cent of US "tight oil" output would be immediately rendered uneconomic at a level of US$90 per barrel. This figure would rise to 39 per cent should prices slump as low as US$80 per barrel.
The International Energy Agency - the world's top oil watchdog - revised down in September its forecast for demand for both 2014 and 2015 in response to China's sudden slowing. The Paris-based group cut 900,000 bpd from demand growth this year and 1.2 million bpd from its forecast in 2015, when it expects the total global draw on oil to be in the region of 93.8 million bpd.
Falling oil prices: what they mean for Opec and NZ
What's driving oil prices down?
Opec states have largely managed to maintain cohesion over the past decade with oil prices over $100 a barrel, but prices are breaking down. Fracking has helped the United States achieve its highest oil production levels since 1986 and there is weakening world demand as China's economy slows.
Who are the big losers?
Oil has enriched the economies of Opec states but a prolonged fall in prices will hurt them. If oil falls under $80 a barrel, Russia could also suffer seriously. Fracking in the US has driven down prices but if they fall too far this unconventional technique could become uneconomic.
What does this mean for New Zealand?
If prices continue to fall, motorists should be insulated from the impact of the lower Kiwi dollar. Oil producers here, however, will not be so happy.
