Losing more than a quarter of their value, oil prices were set for their biggest one-day decline in 29 years on Monday after Saudi Arabia ignited a price war in a market already reeling from the impact of the coronavirus on global demand.
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Saudi Arabia slashed its official selling prices and made plans to ramp up crude output next month after Russia baulked at making a further steep output cut proposed by the Organisation of Petroleum Exporting Countries to stabilise oil markets.
Brent crude futures were down $US11.81, or 26 per cent, at $US33.46 a barrel by 0650 GMT (1750 AEDT) after earlier dropping to $US31.02, their lowest since February 12, 2016.
Brent futures are on track for their biggest daily decline since January 17, 1991, when prices dropped at the start of the first Gulf War, as the market had been expecting the war for months.
US West Texas Intermediate (WTI) crude fell by $US11.48, or 28 per cent, to $US29.80 a barrel after touching $US27.34, also the lowest since February 12, 2016.
The US benchmark was potentially heading for its biggest decline on record, surpassing a 33 per cent fall in January 1991.
"The timing of this lower price environment should be limited to a few months unless this whole virus impact on global market and consumer confidence triggers the next recession," said Keith Barnett, senior vice-president strategic analysis at ARM Energy in Houston.
Shares in state oil giant Saudi Aramco were put in a trading halt after dropping by 10 per cent as the Riyadh stock market opened.
The disintegration of the grouping called OPEC+ - made up of OPEC plus other producers including Russia - ends more than three years of cooperation to support the market.
Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March, two sources told Reuters on Sunday.
The world's biggest oil exporter is attempting to punish Russia, the world's second-largest producer, for not supporting the production cuts proposed last week by OPEC.
Saudi Arabia, Russia and other major producers last battled for market share like this between 2014 and 2016 to try to squeeze out production from the United States, which has grown to become the world's biggest oil producer as flows from shale oil fields doubled over the last decade.
"The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus," Goldman Sachs said.
Saudi Arabia over the weekend cut its official selling prices for April for all crude grades to all destinations by between $US6 and $US8 a barrel.
Australian Associated Press
