The warnings came as Opec producers and Russian companies fight a cut-throat battle for market share in Europe and Asia. Saudi Arabia is shipping crude to Poland and Sweden for the first time. Iraq is selling its low grade "Basra heavy" crude on global markets for as little as US$30 a barrel. Iraq is seeking a large rescue loan from the International Monetary Fund.
It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28 million barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30 millions barrels offshore ready to sell as soon as sanctions are lifted.
"The world is floating in oil, and commercial stocks on land are at a record high," said David Hufton, head of oil brokers PVM Group. "Stocks have been building continuously for two years. This is unprecedented.
"What has saved us so far is that China has been buying 200,000 to 300,000 barrels a day for their strategic reserve."
The Chinese authorities certainly want to keep building stocks -- and do so at bargain prices -- since reserves cover just 50 days demand, far short of the 90-day minimum recommended by the International Energy Agency. But the new storage depots in Gansu and Xinjiang will not be ready until the end of the year at the earliest.
Data from the US Energy Department shows that America's storage sites are 70pc full.
Saudi Arabia and its key Gulf allies are staying the course for now, convinced that their strategy is paying off as the fall in the US rig-count leads -- with a lag of several months -- to a significant drop in shale output. Some $200 billion of long-term projects have been cancelled around the world, notably in deep waters, the Arctic, and the Canadian tar sands, but most of this has no immediate effect on prices.
The world is floating in oil, and commercial stocks on land are at a record high.
Ali al-Naimi, Saudi Arabia's oil minister, said global demand is recovering and prices will rebound next year as the market comes back into balance. The greater risk is a lack investment in future supply as the "decline rate" on existing fields accelerates to 4pc a year or even higher. "We need billions of dollars to continue exploration and producing oil," he said.
The IEA said in its World Energy Outlook last week that it takes US$650 billion of fresh investment each year just to stand still.
It is an open question whether Mr al-Naimi's soothing words will assuage Algeria, Venezuela, Libya, Nigeria, Iran, and others when they gather for a fractious Opec meeting in Vienna on December 4. Saudi assurances that prices would soon rebound have proved wrong time and again over recent months.
The majority of the cartel favours an output cut to stop the pain. The mood is now so tense that Opec has had to suspend publication of its long-term strategy report, ostensibly due to a dispute over what constitutes a "fair" price but in reality due to a deeper clash over the likely future of the oil industry as renewable technology advances by leaps and bounds, and world leaders commit to sweeping curbs on carbon emissions.
Views are deeply polarised over whether it is even possible to stop the US shale juggernaut in any meaningful sense. Paul Horsnell from Standard Chartered expects oil output in the US to fall by 900,000 barrels next year: enough to clear the glut, given that global demand is rising by roughly 1 million b/d.
In stark contrast, Seth Kleinman from Citigroup said US production is likely to remain steady at around 9 million b/d next year, so long as prices remain near US$50.
Several Opec states are in dire straits. Even the Saudis have been downgraded by Standard & Poor's and are facing a budget crunch.
Opec was slow to understand the rising threat posed by the US shale industry. It may now have misjudged its resilience. Frackers have been quick to cut costs with multiple pad-drilling, and they can revive production relatively quickly as soon as prices recover.
Goldman Sachs said the deeper the fall in oil prices over coming months, the sharper the rebound later, comparing it to the cycles after 1986, 1988, and 1998.
Opec needs a higher price to fund the social welfare nets and defence spending of its members. The great question is whether US shale will snap back within months and regain its market share as soon as Opec tries to test the waters again. This strategic showdown may end in an inconclusive draw.
