Oil dropped more than 6% to multi-year lows on Tuesday, and analysts said more declines may follow as the coronavirus pandemic hits demand and Saudi Arabia and Russia battle for market share.
Countries including the United States and Canada, along with nations in Europe and Asia, are taking unprecedented steps to contain the virus, curbing demand for crude and products such as gasoline and jet fuel.
Brent crude fell 98 cents, or 3.2% to trade at $29.07 per barrel, having earlier touched $31.25. On Monday it sank to $29.45, the lowest since January 2016. U.S. West Texas Intermediate crude reversed all of an earlier 4.7% gain to shed $1.75, or 6.1%, and close at $26.95 per barrel, its lowest level since Feb. 2016.
"Unfortunately for the bulls, we believe we have not seen the worst of the price rout yet," said Bjornar Tonhaguen of Rystad Energy."
"The market will soon come to realize that the it may be facing one of the largest supply surpluses in modern oil market history in April."
U.S. President Donald Trump warned on Monday that the United States may be heading into recession as economic activity across the globe slowed and stock markets tumbled.
The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR). Other countries and companies are planning similar measures to fill storage tanks.
Attention will focus later on U.S. inventory reports that are expected to show crude inventories rising for an eighth straight week.
The American Petroleum Institute releases its supply report at 2030 GMT and government inventory data is due to be published on Wednesday.
Despite the loss of oil demand because of the global spread of the virus, Saudi Arabia and Russia are embroiled in a price war instigated after failing to agree to extend supply curbs to support the market.
Saudi Aramco 2222.SE has said it is likely to carry over its planned higher oil output for April into May and that it is "very comfortable" with an oil price of $30 a barrel.
"There is still every sign of a price war on the oil market," said Commerzbank analyst Carsten Fritsch.
"If the announced production increases are actually implemented, the price risks plunging further towards the $20 mark."