Oil prices of $US20 a barrel are now being talked about in financial markets as geopolitical concerns become further elevated because of events in North Korea, China and the Middle East.
Financial markets around the world reacted badly to a soft reading of services activity in China's economy.
China is undergoing a shift from a manufacturing-driven economy to one built on consumer activity.
There was a small pickup in Chinese consumer confidence running into the end of 2015, although echoes of October's downgrade remained and respondents remained cautious on all fronts.
The Westpac MNI China Consumer Sentiment Indicator rose 0.6% to 113.7 in December, holding 4 points above the series low reached two months earlier.
Confidence among ordinary Chinese households had been relatively resilient in the face of the worsening in real economic conditions in 2015, but even so, sentiment over the year has trended downwards.
A range of supportive measures over the year, including the recent fiscal expansion have proved too light a counterweight and the average of the indicator was down to 113.2 in 2015 from 115.2 in 2014.
The average of the series, which began in April 2007, is 120.
Monday's industrial activity numbers wrecked global markets but left oil prices more or less alone.
But financial firm Markit's purchasing manager index for services hit 50.2, signalling things were just barely expanding in China, sparking further worries.
A Bloomberg story in September noted some analysts dispute the notion Chinese oil demand is under threat, but oil industry newswire Platts has just released a report report suggesting the growth of Chinese demand was becoming less robust.
The growing rift between Iran and the Arab world threatening to engulf the crucial Strait of Hormuz led analysts to believe it was increasingly unlikely major exporters in the region would be able to reach an agreement to cut production, further pressuring prices.
At the same time, United States crude oil stockpiles are hovering near a record.
All this means $US20 oil becomes more likely by the day.
Crude oil prices are below $US35 a barrel for the first time since 2004 as data showing a shockingly large build-up of US gasoline supplies feeds fears a global surplus is still growing.
US crude futures fell $US2 to settle at $US33.97 a barrel, its lowest close since February 2009.
Traders are now predicting a price war to maintain market share. Sanctions against Iran are due to lift soon and Iran is expected to flood the market with cheap oil as soon as it can.
Saudi Arabia, which is in dispute with Iran over the killing of a cleric, has kept oil prices artificially low in an effort to put financial pressure on other Middle East producers.
The row between Iran and Saudi Arabia means an agreement on output is becoming less likely.
Craigs Investment Partners broker Chris Timms said shale oil production and increasing capacity from countries such as Russia which needed to protect revenue, combined with expectations of further Iranian supply, meant actual production as well as expectations of future production were rising.
Looking ahead at sharemarkets, Mr Timms expected more volatility as the conflicts in the Middle East and China's economic downturn continued.
Rising gold prices were benefiting companies such as Oceana Gold, whose shares reached $3.20 yesterday.
US treasury bonds were also proving popular as institutional investors sold risk assets and moved to safer investments.
In New Zealand, some retail investors were taking profits after doing well in recent months.
They were likely to come back when the markets settled because low interest rates globally would not provide enough income for many, Mr Timms said.
At a glance
• Oil prices reach an 11-year low on Middle East tensions.
• Oil at $US20 a barrel is now being talked about.
• Global sharemarkets fall on China fears.
• North Korea's hydrogen bomb claims affects both oil and markets.
