US oil prices plummeted 7% to a one-year low of $55.69 a barrel on Tuesday. It was crude's worst day since September 2015.
"Bearish sentiment has seized control of the oil markets," said Clay Seigle, managing director of oil at Genscape.
It's been a huge reversal considering oil spiked to a four-year high of $76 a barrel as recently as early October.
Crude crashed into a bear market last week and the selling has only accelerated since then. Not even efforts by Saudi Arabia calmed nervous oil traders down.
The kingdom announced plans on Monday to cut shipments by 500,000 barrels per day. Saudi Arabia also threw its weight behind potential OPEC production cuts at next month's meeting in Vienna.
Much of the concern surrounds the sanctions imposed on Iran. Although the Trump administration initially vowed to zero out Iran's oil exports, American officials later took a softer approach out of fear of riling the energy markets. The Trump administration granted waivers allowing China, India and other nations to keep buying oil from Iran.
Yet Saudi Arabia, Russia, and the United States ramped up output in recent months in a bid to avoid a shortfall caused by Iran. US output has spiked to record highs, led by the shale boom in the Permian Basin of West Texas.
At the same time, worries about the health of the world economy have cast a shadow on the demand outlook. Nearly half the fund managers surveyed by Bank of America Merrill Lynch expect global growth to decelerate in the next 12 months, the worst outlook since November 2008.
"Even though demand seems to be holding up pretty well, there are lots of worries over trade wars, emerging markets, and the strong dollar," said Michael Wittner, global head of oil research at Societe Generale. "The negative sentiment is palpable."
Meanwhile, President Donald Trump is lobbying Saudi Arabia and OPEC to keep output on track.
"Hopefully, Saudi Arabia and OPEC will not be cutting oil production," Trump tweeted on Monday afternoon. "Oil prices should be much lower based on supply!"
Seigle said that Trump's pressure has added a further element of unpredictability into the oil markets.
"Previous presidents walked on eggshells with OPEC," said Seigle.
At the same time, Saudi Arabia is still reeling from the controversy around the death of Washington Post journalist Jamal Khashoggi.
"Saudi Arabia probably correctly perceives they are in the doghouse internationally," said Seigle.