Oil prices slid more than 4% to new 11-year lows on Wednesday as the row between Saudi Arabia and Iran made any cooperation between major exporters to cut output even more unlikely.
Benchmark Brent crude futures were at $35.07 a barrel, 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. US crude futures were down 88 cents at $35.09 a barrel after already slipping 79 cents the previous day, Reuters reported.
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 tension over Saudi Arabia's execution of a top Shia cleric Sheikh Nimr al-Nimr has stripped nearly 8% off the oil price 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.
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.
"Shale production and increasing capacity from countries like Russia who need to protect revenue combined with expectations of further Iranian supply mean actual production and expectations of future production are rising," Hewson said.
Still, a senior Iranian oil official said the country could moderate oil export increases once the sanctions are lifted to avoid putting prices under further pressure.
In the US, concerns over mounting oil stock levels persisted, with crude inventories likely to have risen by 439,000 barrels last week, according to a Reuters poll.
