Standard Chartered joins a growing list of banks such as Goldman Sachs, RBS and Morgan Stanley that are ultra-bearish about oil. The UK bank is the latest to warn that the commodity's price could slide to $10 (£7, €9.2) a barrel.
While WTI crude oil was trading at $30.70 and Brent was at $30.95 during Asian trading hours, the former recently touched $29.93, a level last seen in December 2013. Brent slipped to a fresh 12-year low of $30.41 a barrel.
Standard Chartered said oil prices will not bottom out until "money managers in the market conceded that matters had gone too far. Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the dollar and equity markets".
Oil at $10 was last seen at the height of the Asian financial crisis in 1998. At such low prices, the price of petrol would fall to 86p per litre, Simon Williams, spokesman and lead on fuel at RAC, said. "The last time we saw average prices this low was in early 2009. However, for prices to get this low the pound would have to get no weaker against the dollar than it is today," he added.
Others who have warned about oil prices include, Christian Lagarde, chief of the International Monetary Fund, who said that prices were "likely to stay low for a sustained period" because of supply and demand factors.
Fereidun Fesharaki, the Iranian chairman of Facts Global Energy (FGE), recently said oil prices could further fall to $25 a barrel by March as Iran is expected to begin increasing its oil production soon, following the lifting of international sanctions.
Michael Hewson at CMC said: "When the clamour for lower prices becomes a stampede, warning signs and alarm bells tend to start going off, which suggests that a more prudent approach might be advisable."
No emergency Opec meeting
The warnings come as Opec, the 13-nation cartel which controls a third of the world's oil production and meets twice a year to discuss issues, said it would not hold an emergency meeting irrespective of requests from some of its members. Its December meeting ended without any conclusion over production targets, as both Saudi Arabia and Iran fight for dominance of the world's oil market.
Suhail bin Mohammed al-Mazroui, minister of energy in the United Arab Emirates, who hinted that it would take another 18 months for oil prices to start picking up, said: "I'm not convinced Opec alone can change or can solely, unilaterally, change this strategy just because we have seen a low in the market."