Oil fell below $33 a barrel on Thursday for the first time since April 2004 as a fall in Chinese shares rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.
Oil prices have fallen by around 70% since mid-2014, hurting oil companies and governments that rely on crude revenue.
China let its yuan currency slip on Thursday, sending regional currencies and stock markets globally tumbling. The offshore yuan fell to its lowest since trading started in 2010.
China’s stock markets were suspended less than half an hour after opening on Thursday after sharp falls triggered a new circuit-breaking mechanism for a second time since its introduction this week.
“Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (U.S.) gasoline stocks from yesterday and this is reflected in prices,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
Brent fell more than 5% to a low of $32.16 before paring some of its losses. It stood down 3.4% at $33.07 at 1230 GMT..
U.S. crude futures hit a low of $32.10, their lowest since late 2003, before bouncing slightly to $32.72.
Prices trimmed early losses, with violence in the Middle East and north Africa offering a measure of support for the market.
A military training center in the Libyan town of Zliten was hit by a truck bomb on Thursday, causing dozens of casualties, witnesses said, while dozens of air strikes hit the Yemeni capital Sanaa.
However, oil’s rapid fall has made a prediction that Goldman Sachs made last year that crude could fall as low as $20 per barrel seem less outlandish than it then seemed.
On Wednesday, U.S. government data showed a 10.6-million-barrel surge in gasoline supplies, the biggest weekly build since 1993.
Analysts said further builds in global inventories are possible, putting more pressure on prices.
“All looks set for yet higher oil inventories on top of already record high levels,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.
“European crude and product inventories are close to full with Asian inventories moving closer to capacity during Q1 2016, with global residual surplus most likely having to be stored in the U.S., resulting in a potentially rapidly rising U.S. oil inventories.”
Technical analysts also said there was little to stop the price tumbling further.
“The ‘bear-fest’ has now begun,” PVM technical analyst Robin Bieber said. “The trend is down and likely to accelerate lower – it is not advised to be long. There are targets lower and these are likely to be mere staging posts on a much bigger move south.”
Exacerbating the oil market woes is weakening demand, especially in Asia including China, which is seeing its slowest economic growth in a generation.