US crude tumbled below $28 a barrel in Asia today, hitting new 12-year lows, after the International Energy Agency (IEA) warned that the oil market could “drown in oversupply”.

West Texas Intermediate (WTI), the US benchmark, struck a low of $27.92 a barrel at one point before recovering. It was trading at $28.15, down 31 cents, or 1.09%, at around 0240 GMT.

The last time WTI closed below $28 was in September 2003.

Brent crude — which briefly fell below $28 on Monday — was 13 cents lower at $28.63.

“The EIA report played a big part in the price decline,” said Phillip Futures analyst Daniel Ang, adding that this underscored the current “bearishness in the market”.

He also said the WTI February contract was due to expire later in the week, which could have prompted traders to roll over their positions to the March contract.

The EIA yesterday said oil prices are set to fall further this year as supply vastly exceeds demand, with major oil exporter Iran’s return to the market offsetting any production cuts from other countries.

“Can it go any lower?” the IEA said. “Unless something changes, the oil market could drown in oversupply. So the answer to our question is an emphatic yes. It could go lower.”

The market has been awash with supplies owing to high production levels in the US and in the OPEC cartel, which last year rejected calls to slash output as it looks to maintain its market share.

Prices have crashed about 75% since mid-2014, hit by a perfect storm of a supply glut, weak demand, a slowing global economy and a strong dollar.