Prices of North Sea Brent crude futures for January delivery fell 44 cents to dollars 13.65 in London, the lowest since November 1988. But they recovered late in the day to close just under dollars 14, and in New York closed at dollars 14.08.
The dollars 2 collapse in the past two weeks, triggered by Opec's decision not to cut output to cope with lower demand, was the latest leg of a prolonged decline that has depressed prices from nearly dollars 20 at the beginning of this year.
Geoff Pyne, analyst with UBS Securities, said: 'The latest nail in the coffin is the Iraqis hinting that they might accept conditions for a dollars 1.6bn one-off oil sale under United Nations supervision.'
On Thursday a report by Petroleum Intelligence Weekly, an industry newsletter, said Iraq might sell oil again as early as the spring after showing new flexibility regarding the plan. Iraq has resisted the sale since summer 1991, to avoid supporting the UN or redistributing its oil to its Gulf war enemies.
Renewed Iraqi exports are a threat to the oil market because its production, estimated as high as 2.5 million barrels per day, would be a blow to the already-fragile market. On Wednesday, the UN said the main obstacle to lifting its oil embargo had been overcome with Baghdad's agreement on weapons control.
Worries about seasonal demand this winter, now that the Arctic cold snap affecting Europe has abated, the reopening of Russian ports and renewed loadings from the North Sea after bad weather delays also gnawed at the market.
Lawrence Eagles, analyst with GNI Research, said: 'It's difficult to make a prediction . . . But I wouldn't be surprised if we saw dollars 12 a barrel.'Reuse content