US crude prices plummeted nearly five percent Tuesday as the International Energy Agency slashed its oil demand forecast in light of slowing economic growth in Asia and Europe.
US benchmark West Texas Intermediate for delivery in November sank $3.90 to $81.84 a barrel on the New York Mercantile Exchange, a decline of 4.5 percent.
European benchmark Brent oil for November delivery tumbled $3.85 (4.3 percent) to $85.04 a barrel, its lowest level since November 2010.
Since mid-June, WTI has fallen 24 percent and Brent has dropped 27 percent.
The IEA announced Tuesday in an October market report that it had cut its forecasts for global oil demand growth for the third month in a row.
For this year, it expects demand to rise by just 700,000 barrels per day to 92.4 million barrels per day (mbpd), which is 200,000 bpd less than the previous growth forecast.
For 2015, the agency cut its estimate of global demand from 93.8 mbpd to 93.5 mbpd.
The IEA also cited “abundant” volumes of available crude as a drag on oil prices, saying September could turn out to be a “high-water mark” for supply.
Oil traders also got a fresh reminder of the struggling German economy as the German economy ministry disclosed that it now expects economic growth of 1.2 percent in 2014 and 1.3 percent in 2015, instead of the previous forecasts of 1.8 percent and 2.0 percent, respectively.
Analysts also attributed the oil slump to growing acrimony in the Organization of the Petroleum Exporting Countries, whose members seem more inclined to fight for market share than to cut back output in the face of falling prices.
Crude was “walloped” as the market “entertains a possible new paradigm in the global oil market regarding OPEC combined with a soft monthly oil report from the IEA and a slashed economic outlook by the German economy,” said Matt Smith, analyst at Schneider Electric.