West Texas Intermediate crude oil futures fell below $90 a barrel for the first time in 17 months Thursday, after Saudi Arabia shocked the oil market Wednesday with a price reduction.
And market prices could head lower still, experts say.
"OPEC appears to be gearing up for a price war," Commerzbank analysts state in a commentary obtained by
CNBC.
"Such measures give rise to doubts about OPEC's longstanding strategy of striving above all for price stability," they write. "We therefore do not expect prices to stabilize until this impression disappears and OPEC returns to coordinated production cuts."
November crude futures closed at $89.67 Thursday.
While OPEC was expected to cut back on production to support prices, Saudi Arabia cut the price of its oil to Asia by $1 a barrel. Sluggish demand and buoyant output also are weighing on oil prices. U.S. production will surge in 2015 to the highest level in 45 years amid the shale oil boom, according to the Energy Information Administration.
"It's both supply and demand. It's basically the perfect storm that brought oil prices down," Fadel Gheit, Oppenheimer senior energy analyst, tells CNBC.
"You have plenty of supply which you never thought possible, and all of a sudden, demand is shrinking. China's slowing down, Europe never recovered," he adds.
"It will not be a full-fledged price war," Gheit noted. "There are always skirmishes but not a full-fledged war because OPEC really is held together by Scotch Tape. . . . They hate each other. At the end of the day, I think they are paying the price. They never really pay attention to any alternative for their own [oil] revenues."
This dynamic is scaring away investors.
"There's not enough good news out there for the money managers to stay in this market," Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management, tells
Bloomberg.
And Jason Kenney, an equity analyst at Banco Santander, tells the news service that oil is likely to break definitively below $90.
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