Global crude prices plunged further on Tuesday as Brent crude fell almost 3 percent to a fresh low near $86 a barrel, trading at its weakest level since 2010 after the West's energy watchdog cut its estimates for oil demand this year and next.
The global oil benchmark has fallen 25 percent from its 2014 high in June as supplies have risen and global demand has slowed, creating a glut in many markets.
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The International Energy Agency said on Tuesday world oil demand growth would be much weaker than previously expected and raised questions about OPEC's willingness to rein in supplies, suggesting oil prices may drop further.
The Organization of the Petroleum Exporting Countries, which supplies more than a third of the world's oil, has shown little sign that it will cut output, despite the price rout.
"Recent price drops appear both supply and demand driven," the IEA said in its monthly oil market report. "Furtheroil price drops would likely be needed for supply to take a hit - or for demand growth to get a lift."
Brent crude fell $2.72 a barrel to $86.17, its weakest point since December 2010, before recovering slightly to around $86.45 by 11:18 EDT (1518 GMT).
U.S. crude fell $1.44 a barrel to $84.27 after it pared sharp intraday losses on Monday to settle down 8 cents. Its discount to Brent narrowed to less than $2 a barrel at one stage for the first time since Oct. 3.
The IEA, which advises industrialized countries on energy policy, cut its estimates for global oil demand growth by 250,000 barrels per day for this year and by 90,000 bpd for 2015. It said demand for OPEC oil would be 200,000 bpd lower for both years.
WEAK EUROPE WEIGHS BRENT
The IEA's supply forecast is "piling on" already weak economic data from Europe, said analyst Phil Flynn of Prices Futures Group in Chicago. "Numbers out of Europe show deflationary pressures are extending even into the UK."
Germany's economy could shrink in the third quarter, but any recession, as defined by two or more consecutive quarters of declining output, should not last long, the chief economist of think tank ZEW said on Tuesday.
Investors were looking ahead to weekly U.S. data on oil and product inventories for price direction.
U.S. commercial crude stocks were estimated to have increased in the week ended Oct. 10, while refined products are likely to have fallen, according to a Reuters survey ahead of the inventory reports out of the world's biggest oil consumer.
Industry group the American Petroleum Institute will issue its report on Wednesday, and the U.S. Energy Information Administration will follow with its weekly data on Thursday. The reports have been delayed a day due to Monday's Columbus Day holiday.