Brent crude fell to a fresh 47-month low on Wednesday, dipping below $84 a barrel as faltering global growth curbed demand for fuel at a time of heavy oversupply.
Oil saw its biggest daily fall in more than three years on Tuesday after the West's energy watchdog slashed its forecasts for world oil demand for this year and 2015.
Core members of the Organization of the Petroleum Exporting Countries appear to be focused on fighting for market share rather than on cutting production to shore up prices.
Weak European stock markets has helped extend the rout.
"The global environment is bearish," said market analyst Olivier Jakob of PetroMatrix. "There's broad acceptance by the market that Saudi Arabia is willing to let prices go lower. With the velocity of the drop, definitely you've got people liquidating positions."
Brent for November touched a low of $83.37, down $1.67, before rallying to around $84 by 0820 GMT. Brent has now fallen more than 25 per cent from the mid-June peak.
US crude fell $1.10 a barrel to $80.74 after posting its largest fall in a single session in nearly two years on Tuesday.
Dealers said technical selling was coming into play, with Wall Street banks scrambling to neutralise exposure to big oil option trades, but the main pressure came from burgeoning global oversupply.
Data from the United States suggest no eminent abatement to the boom in shale oil production.
US shale oil production is set to grow by around 106,000 barrels per day in November from this month, the US Energy Information Administration said.
On Tuesday, Iran said it could live with lower oil prices, joining the chorus of similar signals from core OPEC members Saudi Arabia and Kuwait.
Analysts said the moves signify a willingness to bring prices lower in an effort to curtail supply growth from non-OPEC producers, such as the United States and Russia.
"There is a lot of talk about what is the price level that will hurt the United States and Russia ... what is the real pain level," Jakob said.
Weak economic data has poured in from Europe and Asia over the last month, cutting demand growth expectations.
Germany, Europe's largest economy, has registered a string of negative indicators, sparking talk of a contraction in the third-quarter.
US commercial crude oil inventories were forecast to have increased in the week ended October 10, while refined products likely fell, according to a Reuters poll of analysts.
Industry group the American Petroleum Institute (API) will issue its report later on Wednesday, and the EIA will follow with its weekly data on Thursday. The reports have been delayed a day due to Monday's Columbus Day holiday.
(Additional reporting by Florence Tan)