Brent and U.S. WTI crude oil prices fell to their lowest levels in almost six years on Tuesday as a big OPEC producer stood by the group's decision not to cut output to tackle a glut in the market.
Oil prices have fallen 60 percent from their June 2014 peaks, driven down by rising production, particularly U.S. shale oil, and weaker-than-expected demand in Europe and Asia.
Rather than cutting output to try to balance the market, producers from the Organization of the Petroleum Exporting Countries (OPEC) are offering discounts to customers in an attempt to defend market share.
At 1032 GMT, February Brent crude was down $1.06 at $46.37 a barrel, after dipping to $45.23, its lowest since March 2009.
U.S. crude for February was down $1.15 at $44.92 per barrel, off an intraday low of $44.21.
"The market is in a bit of a panic now and the momentum is really quite negative. We haven't seen any actions or comments that could reduce this aggressive selling," said Ole Hansen, senior commodity strategist at Saxo Bank.
On the contrary the United Arab Emirates' oil minister, Suhail bin Mohammed al-Mazroui, said on Tuesday that OPEC's November decision not to cut output had been the right one.
"The strategy will not change," he said. By not reducing output, "we are telling the market and other producers that they need to be rational".
Oil prices have fallen so far that the front-month February contract is now trading about $7 below the July contract, encouraging traders to hire tankers to store oil at sea.
"Once floating storage starts, there is very little support on the downside for Brent spreads," analysts at Energy Aspects said in a note.
Storage plays work when traders can buy cheap oil to sell at a higher price at a future date. Deflationary pressures are beginning to build in both Asian and European economies as demand remains weak. UK inflation dipped to a 14-year low in December.
The downward pressure on oil prices is so large that even record Chinese crude imports for December, above seven million barrels per day for the first time as the world's second largest oil consumer took advantage of low prices to build up its strategic reserves, could not lift the market for long.
Banks have slashed their oil price outlook, with analysts at Goldman Sachs cutting their average forecast for Brent in 2015 to $50.40 a barrel from $83.75.