The International Energy Agency says oil prices may fall further this year due to low demand, warm winter weather and an oversupply of crude.
The organization, which advises countries on energy policy, said in its monthly report Tuesday that global excess supply may reach 1.5 million barrels per day during the first half of the year.
"Unless something changes, the oil market could drown in over-supply," the IEA said.
U.S. crude prices have fallen 24 percent since the beginning of the year. Benchmark U.S. crude fell $1.03, or 3.5 percent, to $28.39 a barrel in New York on Tuesday.
The drop in oil prices transplates into lower gas prices at the pump. The online service GasBuddy.com said the average price of a gallon of gas in Chattanooga fell Tuesday to $1.58 a gallon — the lowest price since November 2008. At least four stations in East Brainerd area were reporting gas prices fo $1.45 a gallon for regular gasoline on Tusday.
Many oil companies, including Chevron and BP, have cut jobs and reduced spending to save money.
The IEA noted mild temperatures at the outset of winter in the U.S., Japan and Europe lowered demand for oil.
Meanwhile, more oil from Iran could boost global supplies further. Iran has said it is aiming to increase its oil production by 500,000 barrels per day now that sanctions have been lifted under a nuclear deal with world powers.
"There will be enormous strain on the ability of the oil system to absorb it efficiently," the IEA said, referring to the overall excess supply.