The threat of a flood of cheap supply compounded market concerns as Saudi Arabia promised to raise oil output to a record high in a standoff with Russia
Oil prices sank again on Thursday along with the broader market after the United States banned travel from Europe following a World Health Organization delaration that the coronavirus outbreak is now a pandemic.
Market worries were compounded by the threat of a flood of cheap supply as Saudi Arabia promised to raise oil output to a record high in its standoff with Russia.
Brent crude was trading down $1.91, or 5.3%, at $33.88 by around 0339 GMT, slightly above earlier lows. The contract fell nearly 4% on Thursday.
US crude was down $1.74, or 5.3%, at $31.24 after dropping 4% in the previous session.
Oil is down around 50% from highs reached in January.
Global shares also crumbled after US President Donald Trump said the United States will suspend all travel from Europe as he unveiled measures to contain the coronavirus epidemic.
The travel ban, which excludes Britain, will hit US airlines "extremely hard," their industry association said.
The surprise move is likely to mean a further drop in demand for jet and other fuels in an already battered oil market though, for now, just how much is hard to quantify.
"A WHO declaration of global emergency and US-EU traffic ban is dampening the global energy demand outlook, in conjunction with an intensified price war between Saudi and Russia," said Margaret Yang, market analyst at CMC Markets in Singapore.
"Bears are dominating the oil market and there might be more downside before a bottom can be reached," she added.
The United Arab Emirates followed Saudi Arabia in announcing plans to boost oil output after the collapse last week of an agreement between OPEC, Russia and other producers, a grouping known as OPEC+, to withhold supply and buttress prices.
UAE's national oil company, ADNOC, said it plans to raise crude sales to more than 4 million barrels per day (bpd) and accelerate a push to boost capacity by a quarter to 5 million bpd.
"Without OPEC+, the global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand," said Espen Erlingsen, head of upstream research at Rystad Energy, which estimates that oil will need to fall to the low $20s to achieve equilibrium.
The US Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) have slashed forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.
Still, weekly data on US inventories showed minimal effects from the coronavirus pandemic. Crude stocks increased by 7.7 million barrels, but inventories of gasoline and diesel fell sharply, as refining runs remain at seasonally low levels.