Oil prices have plunged 10% as yet more bad economic data sent stock markets sharply lower and undermined hopes of economic recovery.
US light crude fell by $4.61 to $40.15, while London Brent crude dropped $4.14 to $42.21.
Huge losses at US insurer AIG and plans for fund raising by HSBC bank sparked sharp falls in global markets.
And weak manufacturing figures in the UK and eurozone only served to deepen the gloom yet further.
'Weaker demand'
With hopes of an early economic recovery now fading, fears are growing that demand for oil will remain depressed.
Oil cartel Opec has already cut production by millions of barrels a day in an attempt to support oil prices.
"Although, OPEC, by all counts, is doing a good job in complying to its quota levels, it looks like flat price is being driven by the deteriorating global economic environment as reflected in the Dow Jones [industrial average]," said Nauman Barakat, senior vice president at Macquarie Futures USA.
Michael Lynch at Strategic Economic and Energy Research said: "We had the run-up last week, but now people are looking at weaker demand signals," said Michael Lynch at Strategic Economic and Energy Research.
A number of observers, he added, now believe that more supply side cuts will be needed to prop up the oil price.
Algerian Energy and Mines Minister Chakib Khelil said on Sunday that "it is quite possible that OPEC will decide to make a further reduction of production" at its next meeting scheduled for 15 March.
However Iran's Oil Minister, Gholamhossein Nozari, said he did not expect another output cut.
