Oil hits a 13 year low, will gas prices follow

A customers prepares to pump gas on Monday, Dec. 7, 2015, at a gas station in Pembroke, Mass. The price of a barrel of oil fell Monday to a nearly seven-year low. With OPEC's decision to keep pumping at current levels, analysts expect oil to remain relatively cheap well into 2016 and maybe longer. (AP Photo/Stephan Savoia)

(CNN) U.S. crude futures dropped as much as 5% on Thursday, driving prices below $27 for the second time in recent weeks. Before this year, oil prices hadn’t dipped below $27 since 2003.

The steady decline is creating a widespread headache for financial markets. It’s causing energy companies’ profits to plunge, raising worries about the prospect of bankruptcies in the oil sector and spooking investors about global growth. In total, crude oil has plunged an incredible 75% from its June 2014 peak of almost $108.

U.S. stock markets followed by declining sharply. The Dow fell as much as 350 points and the Nasdaq moved closer to a bear market, or 20% below its most recent high point.

World markets also suffered. In Asia the Hang Seng (HSI) dropped nearly 4% Thursday, while theNikkei (N225) shed 2.3%. Major indexes in Europe were 1.5% to 3% lower after Sweden’s central bank pushed its key interest rate further into negative territory at -0.5%.

The International Energy Agency said earlier this week that it expects the global oil glut to growthroughout the year.

“With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term,” the IEA said in its monthly report.

Freed from sanctions, Iran ramped up its production to nearly 3 million barrels a day in January — an 80,000 increase from December. Iraqi output reached a record high of 4.35 million barrels a day in January, and shipments from Saudi Arabia have also increased.

Many have been hoping that low oil prices would boost oil demand. But the IEA, which monitors energy market trends for the world’s richest nations, is predicting a slowdown because of global economic headwinds.

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