US crude prices dropped more than 9% to around $US36 a barrel as slumping demand and swelling US inventories offset OPEC's record supply cut agreement.
Traders feared the Organization of the Petroleum Exporting Countries would not fully enforce a record output cut.
The January US crude oil contract settled down $3.84 at $US36.22 a barrel, after earlier hitting $US35.98, the lowest price since June 2004.
London Brent settled down $US2.17 at $US43.36 a barrel.
MF Global oil analyst Ed Meir said falling prices were a resounding vote of no-confidence in the cartel's ability to curtail production given its previous tendencies to backslide on commitments, particularly by countries who are financially strapped.
The Organisation of the Petroleum Exporting Countries, OPEC, which produces about 40% of the world's crude, approved a record output cut on Wednesday of 2.2 million barrels a day.
However, the decision failed to prevent prices plunging even further, as rising US energy reserves also heightened global demand worries amid a sharp worldwide economic slowdown.
Also depressing prices was a US Department of Energy report that American crude oil stockpiles climbed by 500,000 barrels in the week ending 12 December.
The rise was five times market expectations and indicated weaker US energy demand.