The price of Brent crude oil has fallen $3.60 - 4.4% - to $77.52, its lowest level for four years.
The benchmark US crude oil price is also at a four-year low, after losing $2.57 to close at $74.28.
The price has fallen sharply since the summer and is 30% below its June price.
The drop comes as traders believe members of the Opec oil exporting countries, which control about 40% of world oil exports. will not cut production.
Opec's 12 member countries will meet later this month to discuss the global oil market.
Lower oil prices typically prompt Opec nations, which include the biggest oil exporting nation in the world, Saudi Arabia, to rein back output in order to limit supply and boost prices and income.
Most need higher oil prices to fund rising government spending.
But recent comments by oil ministers from Saudi Arabia and Kuwait suggest the group is unlikely to agree to a cut.
The US energy department said this week that it expected low fuel prices to last into next year.