Oil prices careered lower, with Brent crude, the global benchmark, slumping around five per cent to $32.54 per barrel. Similarly, West Texas Intermediate crude, the US benchmark, fell about six per cent to $29.71.
Goldman Sachs said it was "highly unlikely" Opec would cooperate with Russia to cut output, saying this would be self-defeating as stronger oil prices would bring previously abandoned production back to the market.
The S&P energy index fell 3.26 per cent to 412.63 points, the biggest drag on the S&P 500.
It was also weighed down by oil major Exxon Mobil which reported quarterly profits slumped 58 per cent to $2.78bn (£1.93bn) in the three months ended December.
With Exxon, "not only did the earnings disappoint people, but the fact that they slashed capex so much and they (suspended) their share repurchase program. It's a good indication that one more large oil company is not seeing an improvement in the environment," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
Over in the UK, London-listed BP reported its biggest annual loss in at least 20 years, sending its shares down 7.15 per cent to 340.70p per share.