Crude slumped last week after a shock rise in US stockpiles, up 3.3million barrels to 513million, according to the Energy Information Administration (EIA).
Brent crude slipped to about $48 a barrel, its lowest level since December, and analysts said it could go sharply lower.
Crude dipped below $27 a barrel in January last year and Chris Beauchamp, chief market analyst at online trading platform IG, said a repeat of those levels is a distinct possibility: “Crude tends to overshoot on both the upside and the downside.”
The oil price recovered after Opec and non-Opec producers agreed to cut output last December, but Beauchamp added: “The world is still drowning in oversupply.”
Shale drillers have made up for reduced output and the EIA predicted last week that daily US production could hit a record 10million barrels next year.
“Opec is fighting a losing battle,” Beauchamp added.
BP and Shell have worked hard to survive cheaper oil by cutting capital expenditure and selling non-core assets, but their fightback is imperilled.
However, Beauchamp added: “I expect them to keep paying their generous dividends for now.”
Fawad Razaqzada, market analyst at Forex.com, said oil is heading lower: “There is nothing to support prices in the short-term.”
Cheaper oil may trim UK inflation, but he added: “Given that tax makes up most of the price we pay at the pumps, the benefit for consumers will be marginal.”