Brent oil prices fell on Monday, tumbling more than $2 a barrel intraday to their lowest since 2010, after key Middle East producers signaled they would keep output high even if that meant lower prices.
Brent oil prices have tanked by nearly 25 percent since June as ample supply coincided with weak demand, raising the possibility that the Organization of the Petroleum Exporting Countries (OPEC) could cut output.
But Saudi Arabia has privately told oil market participants it can accept oil prices between $80 and $90 a barrel, sources briefed by OPEC's biggest producer told Reuters.
Kuwait's oil minister said OPEC was unlikely to cut production to support prices. OPEC ministers will meet to discuss output policy Nov. 27.
"It suggests there's some nervousness in the market that Saudis are seeking to bring pressure on the shale producers in the U.S.," said Gene McGillian, an analyst at Tradition Energy.
"The market is in search of a bottom and we're in the process of finding it, we just have to see what OPEC does and where the economy goes," McGillian said.
Brent November crude fell $1.32 to settle at $88.89 a barrel, having slumped to $87.74, the lowest front-month price since December 2010. The intraday low was a contract low ahead of its expiration on Thursday.
U.S. crude fell 8 cents to settle at $85.74 a barrel, having recovered from an intraday low of $84.07.
The spread between the two grades narrowed, falling to less than $3 after regular trading, the lowest since Oct. 7. One trader said the gap had narrowed because of profit taking on the spread, while a second trader said it was due to global growth. Both struggled to identify why the spread had narrowed late Monday.
The narrower losses were a result of the market "taking a breather" from the rally, said John Saucer, vice president of research and analysis at Mobius Risk Group. "In the near term, I think we need to see some consolidation, some backing and filling," he said. The market may be locked in a holding pattern until the IEA numbers, which are due out early Tuesday.
Growth in China's exports and imports trumped forecasts in September, and the world's largest energy consumer increased crude oil imports by 9.5 percent from August, lending limited support to prices.
Consuming countries like China and India often build up stockpiles when prices are low.
Oil prices could be on the brink of sliding another $10 or more, some analysts said.
Iraq cut its November oil prices for customers in Asia and Europe on Sunday, following a similar move by Saudi Arabia last week.
Kuwait's oil minister, Ali al-Omair, was quoted as saying by state news agency KUNA on Sunday that $76 to $77 a barrel might be the level that would end the oil price slide, since that was the cost of oil production in the United States and Russia.
(By Jessica Resnick-Ault; Additional reporting by Robert Gibbons in New York, Sam Wilkin in London and Meeyoung Cho and Florence Tan in Singapore; Editing by Christopher Johnson, Andrew Hay and Meredith Mazzilli)