United States oil futures in New York slid to the lowest in 12 years as turmoil in China's markets pushes crude closer to US$30 ($45) a barrel.
West Texas Intermediate slid as much as 5.5 per cent yesterday on concern that an economic slowdown in the world's biggest commodity consumer is worsening.
China's central bank cut the onshore yuan's fixing to the lowest since March 2011, triggering a selloff that led to Chinese stock exchanges closing.
Brent oil will slump to US$30 in the next 10 days, says Nomura Holdings, while UBS Group sees an oversupply pushing prices even lower.
"Most people are probably surprised that oil prices would go to this level," said Statoil ASA chief executive Eldar Saetre. "It could go even lower, and it just underlines the uncertainty."
Oil capped the biggest two-year loss on record in 2015 as the Organisation of Petroleum Exporting Countries effectively abandoned output limits amid a global glut.
Stockpiles at Cushing, Oklahoma, the delivery point for US benchmark crude, rose to a record while nationwide stockpiles remain about 100 million barrels above the five-year average.
WTI for February delivery fell as much as US$1.87 to US$32.10 a barrel, the lowest level since December 2003, on the New York Mercantile Exchange.
Brent for February settlement fell as much as US$2.07 to US$32.16 a barrel on the London-based ICE Futures Europe exchange.
The global economy will sputter along this year as China's slowdown prolongs a commodity slump, the World Bank said on Thursday.
The Washington-based development bank lowered its forecast for 2016 growth to 2.9 per cent, from a 3.3 per cent projection in June, according to its bi-annual Global Economic Prospects report.
Crude oil was in a bearish bias, so to reverse this trend you need to have some strong input, the global rout in all assets isn't helping.
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"There's no other input that can really reverse the trend right now in crude oil."
The People's Bank of China on Thursday reduced the yuan's fixing by 0.51 per cent to 6.5646, the weakest since March 2011, before raising it again yesterday.
"Clearly the economic concern is a factor, but that doesn't really explain everything," said Dominic Schnider, head of commodities and Asia-Pacific foreign exchange at UBS' wealth-management unit in Hong Kong.
"There is a weak backdrop given that the market is oversupplied," he said.
"If there is continued build in inventory, the market will not be pleased, and if the market loses patience then the next step is a bit below US$30."