Brent crude March futures traded at London's ICE Futures Exchange fell by 1.75 percent to $28.26 per barrel as at 8 a.m. Moscow time.
By this time, WTI crude February futures slumped at New York Mercantile Exchange (NYMEX) by 2.74 percent to $27.68 per barrel.
The International Energy Agency (IEA) reported Tuesday further oil price plummeting was possible due to Iran's coming back in the market as well as a slowdown in demand for raw materials.
The IEA believes that decline in oil production outside OPEC by 600,000 barrels per day (b/d) expected this year will be completely replaced by Iranian output by mid-2016. Even if the other members of the cartel keep their production volumes, a surplus of oil on world's market could rise to 1.5 million b/d. This can result in even deeper plummeting than that experienced at present, the survey notes.
The IEA recalls world oil demand growth rate this year will be below the level of 2015. If last year, the growth was boasting of record levels since the beginning of the century (1.7 million b/d), this year it will increase only by 1.2 million b/d to 95.7 million b/d.
At the same time, we should not get mistaken by expecting the fall in oil prices will stimulate consumption - forecasts for economic growth in developing countries (Brazil, Russia, China) remain sad.
OPEC oil production, including Indonesia, which has recently joined the cartel, shrank in December by 90,000 b/d to make 32.28 million b/d. This is still higher than expected demand for OPEC oil in 2016 (31.7 million b/d). Moreover, Iran may come up offering additional 300,000 b/d as early as in Q1, the IEA says.