Oil prices have fallen to the lowest levels since the beginning of 2007, amid fears over lower energy demand and worsening economic prospects.
US light sweet crude declined by $1.43 to $57.90 a barrel in New York before rebounding to $58.40. Brent crude fell $1.20 to $54.51 a barrel.
Crude oil has fallen about 60% after reaching a record $147.27 in July.
Investors had hoped for solid growth in oil demand from China, but it has been weakening there, as well as in the US.
“We have a pretty good idea that global growth is going to be pretty awful next year and probably not much better in 2010,” said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.
Most analysts predict the US Energy Department will report on Thursday that US oil inventories have risen for the seventh week in a row, highlighting falling demand.
Analysts also expect the International Energy Agency (IEA) to cut its global oil demand forecast in its report to be published on Thursday. “With definitive slowing in China, the market is even more sensitive to negative economic news out of the US and Europe,” Mr Pervan added.
At the same time, the International Energy Agency (IEA) says the era of cheap oil is over and prices could soon be back up to $100 a barrel.
The IEA, in its World Energy Outlook for 2008, says prices could soar to as high as $200 a barrel by 2030.