The price of oil has fallen to below $45 a barrel for the first time this year, with prices having slumped by more than 20% since the January high.
Brent crude, the international marker, went as low as $44.51 just after 7pm (UK time), a drop of 3.26% since the previous day.
News of increased oil production by Libya and Nigeria saw oil get as low as $45.62 on Tuesday, both countries having been exempted from the supply cuts announced by OPEC members and many other oil-producing countries in November.
The fall in crude price came despite larger than expected US crude and gasoline inventories, a sign that confidence in the OPEC deal is shaky.
Continued oil production in the US has also been blamed for undermining the deal.
The falling oil prices weighed down world financial markets, such as the FTSE 100, which closed at 7447.79 points, down 0.3%.
David Madden, an analyst at CMC Markets, said: “Stocks in Europe are offside today as investors are still a bit wary about the large drop in oil over the past couple of weeks.
“The last two trading sessions have been a reminder of late 2015 and the beginning of 2016, when the collapse in the oil price sparked fears about global growth.
“Investors are worried a depressed oil price could bring about a period of prolonged low inflation, which would have negative implications for growth.
“The other fear about falling oil prices is declining inflation, as it can hamper growth prospects.”
Wednesday’s speech by the Bank of England’s chief economist Andy Haldane signalling he might support a rise in interest rates later this year also had an effect on the FTSE, sending sterling higher and, typically, doing the reverse for the market.
Elsewhere, Frankfurt ended the day down 0.3% and Paris shed 0.4%.
Tokyo was down 0.5%, Hong Kong 0.6%, Sydney 1.6% and the Dow down 0.2% in late morning trading.
Source: SKY News Feed