Oil prices hit their lowest in over 11 years on Wednesday, as the row between Saudi Arabia and Iran was seen making any cooperation between major exporters to cut output even more unlikely.
Evidence of slowing economic growth in China and India has fueled fears that even strong demand elsewhere may not be enough to mop up the excess crude that has resulted from near-record production over the last year.
The furor over Saudi Arabia’s execution of a Shi’ite cleric has stripped nearly 8 percent off the price of oil in the last three trading days alone and has killed speculation that OPEC members might agree on production cuts to lift prices.
“There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely,” said Michael Hewson, head of strategy at CMC Markets.
Benchmark Brent crude futures were at $35.07 a barrel at 1120 GMT, down $1.35 on the day, and at their lowest since early July 2004, having staged their largest one-day drop in percentage terms in nearly five weeks.
U.S. crude futures were down 88 cents at $35.09 a barrel after already slipping 79 cents the previous day.
Oil has slumped from above $115 in June 2014 as shale oil from the United States has flooded the market, while falling prices have prompted some producers to pump even harder to compensate for lower revenues and to keep market share.
Adding to this oversupply, Iranian oil exports are widely expected to increase in 2016 as Western sanctions against Tehran for its alleged nuclear weapons program are likely to be lifted.