U.S. light crude oil fell $2.35 a barrel, or 4.9 percent, to a low of $45.82.
We can attribute the 5 per cent fall in oil prices to concerns about oversupply and a week energy demand environment following the U.S. interest rate hike. Crude joined a sell-off in wider financial markets after an interest rate increase by the Federal Reserve and the threat of a USA government shutdown added to economic uncertainty.
"Because of the great policy uncertainty earlier on, plants have actually readjusted back to using alternatives to USA oil. they just widened our supply options," he said.
USA crude inventories fell by 1.2 million barrels in the week to December 7, compared with market expectations for a decrease of 3 million barrels.
"The current oil prices will force OPEC to increase compliance with the production cut deals, supporting Brent prices", said Wang Xiao, head of crude research at Guotai Junan futures. The prospect of a possible government shutdown in the United States, the world's biggest oil consumer, has added to investors' worries. Since reaching multi-year highs at the beginning of October, both crude oil benchmarks have lost more than a third of their value in their steepest decline for three years.
February WTI Crude Oil Futures, Daily Chart
This adds to the concerns of several market watchers that the decision led by the group to cut production by 1.2 million bpd overall might not be enough to override a glut, especially on the back of soaring U.S. output.
"Some kind of short-covering can happen any time (from) now until the end of the year but no long-term joy is on the horizon for oil bulls", PVM Oil Associates' Varga said.
"According to OPEC's own forecasts, global oil stocks will build by 500,000 bpd in the first half of 2019". Meanwhile, investors remain skeptical that cuts agreed by OPEC and its allies are sufficient to avert a looming oil glut.
That is higher than the initially discussed 2.5% as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.
Global benchmark Brent had been trading higher earlier on Monday after evidence that a recent fall to 15-month lows may be affecting output in the United States, the world's largest producer.
That muted appetite means the United States, which became the world's top oil producer this year as its shale output hit record levels, will continue to hold only a sliver of China's market even as a wave of new refining capacity starts up there. Drilling rig provider Helmerich & Payne was the biggest decliner among energy stocks, plunging more than 7 percent.