Oil fell over six per cent yesterday, as fears of economic slowdown weighed heavier than proposed production cuts by the world's major oil exporters.
US light crude for January delivery, which expired yesterday, settled down $2.35 at $33.87 a barrel, the lowest since February 10, 2004, when it ended at the same level.
Yesterday marked the sixth consecutive day of falls in oil, off more than 29 per cent from the $47.98 seen when prices last rose on December 11.
Oil prices have fallen more than $100 from their peak above $147 in July as a global economic downturn ripped into global oil demand, and looked set for one of their biggest weekly declines for years.
Industry forecasters predict that global oil demand will contract for the first time since 1983.
Pledges by the Organisation of the Petroleum Exporting Countries (Opec) to cut output by 2.2 million barrels per day (bpd) - the largest ever reduction by the producer group - failed to support January prices.
"The market is signaling that it is taking a look at the Opec cut and recognising that is more likely to be evident in February," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
"The February contract has not been able to crack $40 yet, but if inventories and refinery use continue to drop then pressure will resume," he added.
However, many traders doubt Opec, whose third production cut since September has brought its total reduction to more than four million bpd or five per cent of world supply, will fully implement the agreed cuts.
"We believe that full implementation of the cuts is unlikely," Goldman Sachs analysts said in a note to clients.
Opec kingpin Saudi Arabia's Oil Minister Ali al-Naimi, speaking in London yesterday, said the kingdom would be pumping less oil in January and would be at its new output target in line with the group's latest cut.
That reassurance appeared to be having some impact on the market in late European trade yesterday.
"From a credibility standpoint, Opec has no choice but to bite the bullet for the next few months," said Jonathan Kornafel, Asia Director of Hudson Capital Energy.
"Until traders see a sustained drop-off in the rate of demand destruction, the market will have a hard time establishing a floor."
Opec President Chakib Khelil said yesterday he believed oil prices had found a floor around current levels.
"I don't believe there is any reason for it to fall any further. I don't see it going lower," he told Reuters in London.