The price of Brent crude oil declined by more than $1 per barrel, falling below $60 due to tepid Chinese factory activity and dipping currencies of emerging markets, which has affected demand.
This is the first time that the price has hit such a low since July 2009, reports Reuters.
Oil price has declined as much as almost 50% since June. While output has increased, demand has slowed. Despite the drop, OPEC has decided not to cut down production.
Data on factory activity in China has shown a fall for the first time in seven months.
Brent for January delivery declined by $1.31 to stand at $59.75 a barrel, while US crude for January delivery fell $1.06 to reach $54.85 a barrel.
US bank Goldman Sachs was quoted by Reuters as saying: "The oil market is experiencing a cost re-basement, which makes determining when the market is oversold extremely difficult.
"For the market to be oversold, it requires prices to be far below costs, which are falling nearly as fast as the price, which means oil producers can spend less to get the same or potentially even more in terms of production.
"The sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity producing emerging markets in Latin America and the Middle East.
"Historically, these regions didn’t contribute much to oil demand; today, they do."