Brent crude oil prices have dropped to $60, the lowest they have been in five years following OPEC’s announcement it wouldn’t restrict production despite global fuel glut.
Although the North Sea benchmark later recovered to trade around $63, analysts said the market was slowing down threatening the prices with a further slump.
The Organization of the Petroleum Exporting Countries (OPEC) has decided to maintain current levels of production, fearing imposing a cap may have little impact on price and instead mean surrendering market share.
"The decision has been made. Things will be left as is," OPEC secretary-general Abdullah al-Badri told a conference in Dubai on Sunday. "We agreed that it is important to continue with production (at current levels) for the ... coming period."
Oil prices have collapsed over the last six months as high-quality, light crude from North America has flooded the market, surpassing demand. Combined with the lukewarm economic growth, the situation resulted in a fuel glut, which threatens to send oil prices even lower, analysts said.
"Oil prices may move below $60 per barrel in the near term," analysts at Barclays Bank said, but added that "this (level) is not sustainable in the long run".
Barclays said it expected Brent to average $67 per barrel in the first half of 2015 and $78 in the second half of next year.
Brent for January fell to a low of $60.28 a barrel in Asian trade on Monday, down $1.57 and its lowest since July 2009. The futures contract then rallied sharply to trade around $62.95 by 0910 GMT, up $1.10.
US crude for January was trading at $58.50 a barrel, up 69 cents, after hitting a low of $56.25 earlier in the day – its lowest since May 2009.