A late rally in New York erased the worst of oil's losses today, but crude settled down more than 3% at $51.21 -- the lowest settle since May 26, 2005.
At its lowest, oil was off more than 4% to $50.53 after Saudi Arabia said OPEC production cuts were working well and there was no need for an emergency meeting of the producer group.
Crude has fallen 16% since the end of last year, in part due to warm weather in the U.S. Northeast, the world's top heating oil market, in early January.
Heating oil also settled at a 19-1/2 month low while RBOB gasoline closed at the lowest level since it began trading in October, 2005. Natural gas finished up for the second day in a row, extending its gains to 5.4% for the year.
"We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance," Saudi Oil Minister Ali al-Naimi said in New Delhi this morning.
"Do not panic. Actually there is no reason for a meeting."
OPEC decided in October to cut supply by 1.2 million barrels per day from November and last month decided on a further reduction of 500,000 bpd to take effect Feb. 1.
Nigeria's Oil Minister Edmund Daukoru backed his Saudi counterpart's call for calm.
Earlier today, he said the group that pumps more than a third of the world's oil should wait to see the effects of its February cut before taking further action.
"I think we have to take a wait-and-see (approach)," he told reporters on the sidelines of the Petrotech conference in New Delhi. "After we implement 500,000 barrels a day (cut), we have
to see how the market responds."
Venezuela had called for an emergency meeting to take further action to stem the price decline.
"We should not underestimate the global mood on commodities," said Frederic Lasserre of SG CIB in Paris. "There is not as much appetite for commodities anymore."
He predicted oil prices would test $50 in the near term, but then fresh buying interest could emerge.
Analysts said OPEC would also brake the slide and deeper price falls could drive the cartel to implement further cuts.
"We don't really see a collapse in prices. The further it goes down, the more hesitant the market will be about going even further," said Eoin O'Callaghan of BNP Paribas. "OPEC still has an impact on the market."
Due to the Martin Luther King holiday, U.S. oil inventory data will be delayed a day to Thursday at 10:30 a.m. New York time. Natural gas storage data will be released at the same time, unaffected by the holiday.
After a period of relatively mild weather in the U.S. Northeast, the key heating oil consuming region, cooler weather was forecast to hit the area this week.
Heating demand in the U.S. Northeast was forecast to average above normal early in the week, with Wednesday demand well above normal, said private forecaster DTN Meteorlogix.
The six-to-10-day DTN forecast was for temperatures to average near to below normal.