Brent crude futures plunged more than 4 percent to near 12-year lows on Friday as the market braced for increased Iranian oil exports, with the lifting of international sanctions possible within days.
Brent and US crude oil were on track to close lower for a third consecutive week, down roughly 20 per cent from their 2016 highs.
The International Atomic Energy Agency (IAEA) could issue its report on Iran's compliance with an agreement to curb its nuclear programme during a Friday meeting in Vienna, potentially triggering the lifting of Western sanctions.
US crude futures were 5 per cent lower at $29.64 per barrel at 1053 GMT, after posting the first significant gains for 2016 in the previous session. The contract earlier hit $29.39, the lowest since November 2003.
The March Brent contract was down $1.15 at $29.73 a barrel. Earlier on Friday, it fell to $29.43, the lowest since February 2004.
The February Brent contract, which expired on Thursday, closed higher for the first time this year at $31.03 per barrel.
Still, influential US bank Goldman Sachs on Friday maintained its $40 price forecast for US crude for the first half of 2016.
"The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016," Goldman said in a report.
Others were more concerned about the impact of new exports from Iran. While experts warned that not all sanctions may be lifted immediately once the agreement on its nuclear programme came into effect, any additional oil would add to a glut that has pushed prices into a deep slump since mid-2014.
"In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted," Commerzbank analyst Carsten Fritch told Reuters Global Oil Forum.
"That means a drop towards $25 is quite possible, but not much lower than that."
Commerzbank cut its 2016 forecast for oil prices, changing its year-end expectation for Brent to $50 per barrel, down from a previous forecast of $63.
Iran's oil exports were already on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load.
Tehran is expected to target India, Asia's fastest-growing major oil market, as well as its old partners in Europe with the increased exports.
(Reuters)
