Brent crude oil hit a low of $34.13 per barrel at one point yesterday, after figures from the US showed a huge increase in gasoline and distillate inventories. It recovered slightly to trade at $34.38 last night.
The closely-watched weekly figures, from the US Energy Information Administration, showed that while inventories of crude oil have fallen by 5.1m barrels - against expectations of a fall of 500,000 barrels - gasoline stocks jumped by 10m barrel, while distillate fuel inventories rose by 6.3m barrels.
Earlier today Brent plummeted, as mounting concerns regarding oversupply trumped rising geopolitical tension in the Middle East.
Brent initially hit an 11-year low following Opec's apparent failure to agree a production ceiling during its meeting in December.
WTI, the US benchmark, slumped 4.3 per cent to $34.42.
So far, oil has remained largely immune to upward pressure from a deepening diplomatic rift between Iran and Saudi Arabia. Relations between the two regional powers soured after the latter's execution of a prominent Shi'ite cleric over the weekend.
Middle Eastern strife usually boosts oil prices due to fears over supply disruptions. However, it's been dampened by the growing gulf between supply and demand, as global production continues to outpace demand.
"Lingering concerns about growing supply continued to outweigh the implications of rising tensions in the Middle East," ANZ Bank said.
The glut could worsen if Iran returns to the market, a move widely expected this year, once Western sanctions against the country for its alleged nuclear weapons program have been lifted.
The US Energy Information Administration (EIA) will publish its closely watched weekly data at 3.30pm today.