Brent oil prices tumbled Wednesday below $35 for the first time in 11.5 years, plagued by abundant oversupply and the ongoing row between key producers Iran and Saudi Arabia dimming prospects for production cuts.
The market also tanked on expectations that the US government will later report that rising stockpiles added to the global supply glut last week.
In addition, the stronger dollar dented prices because it makes oil more expensive for buyers using weaker currencies, thereby weighing on demand.
At 1030 GMT, European benchmark Brent North Sea crude oil for February delivery sank to $34.83 per barrel — the lowest since July 1, 2004 — before ducking back above $35.
"Oil prices have resumed their downswing," said Commerzbank analyst Carsten Fritsch.
"A firmer US dollar, concerns about demand and the plentiful supply are weighing heavily on prices."
In recent years, the market has been plagued by a global supply glut, collapsing from highs above $100 in mid-2014 as abundant supplies were exacerbated by strong output by OPEC and the United States.
Last year, the oil market tumbled by about one third after the Organization of the Petroleum Exporting Countries (OPEC) — which pumps 40 percent of oil — refused to slash output in both June and December.
Oil continued to spiral lower this week, as escalating diplomatic tensions between Iran and Saudi Arabia added fresh strains on OPEC's unity, as the cartel grapples with a common response to rock-bottom oil prices, experts said.
Added to the picture, Riyadh cut the February price of its European oil exports as the OPEC kingpin continues to fight for market share amid a huge glut.
James Hughes, analyst at trading firm GKFX, said the latest Brent price plunge was sparked partly by dwindling hopes of an OPEC deal to curb record-high cartel output levels.
He added mounting evidence of slowing economic growth in China — the world's second biggest oil consumer after the United States — had fuelled worries over weak demand.
At the same time, oil was pushed lower by fresh geopolitical fears after North Korea's latest nuclear test.
"I think this (Brent price low) is a knock on affect from the likelihood that the geopolitical tensions between Saudi Arabia and Iran have put an end to hopes on a deal on oil production," Hughes told AFP.
"If you then add this to the fact that we have had relentless bad news out of China ... then the snowball effect is in full swing.
"The events in North Korea have only added to further downward pressure."
OPEC policy has become tougher since Saudi Arabia executed prominent Shiite cleric Nimr al-Nimr last weekend, triggering a sectarian standoff with Iran.
"What's happening at the moment between Iran and Saudi Arabia makes searching for a compromise even more difficult," said Francis Perrin, president of Strategy and Energy Policy publications.
Gulf countries, led by influential OPEC kingpin Saudi Arabia, refuse to cut output unless the oil-producing states that are not members of the group agree to do the same.
A cut would likely curb global oversupply, help prices recover and lift precious revenues for the cartel's 13 member nations.
OPEC's no-change stance is aimed at pushing oil prices lower to squeeze less-competitive players, including US shale producers, out of the market.
Iran, meanwhile, has no intention of curbing its production with the lifting of Western sanctions on the horizon, which would allow it to resume crude oil exports.
Later on Wednesday, the US government's Department of Energy will publish its snapshot of American crude inventories for last week.
Shortly after midday, Brent prices stood at $35.07 a barrel, down $1.35 from Tuesday's closing level.
US benchmark West Texas Intermediate for February shed 96 cents to stand at $35.01.