The price of oil has taken another dive, plunging to five-year lows amid mounting evidence that global supplies are far outstripping demand.

The US Energy Department reported a surprise increase in domestic oil inventories and OPEC projected that next year, demand for its crude would sink to levels not seen in more than a decade.

Benchmark US crude slumped 5 per cent, or $3.07, to $60.75 a barrel on Wednesday. Prices have not been that low since July of 2009.

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US crude prices have fallen 17 per cent in two weeks and are now 43 per cent below the $107.26 that a barrel fetched at its peak this year.

Brent crude, an international benchmark used to price oil used in many US refineries, fell $2.91 to $63.93 in London.

Energy analyst and trader Stephen Schork said in an interview that he expects the combination of weak economic news out of Asia and growing global supplies will push oil down further, to below $60, by the end of the week.

“It’s the proverbial ‘trying to catch a falling dagger’ and I’m not going to try to catch it,” he said.

OPEC said on Wednesday it expects demand for its crude to fall to 28.9 million barrels per day next year, 400,000 barrels per day less than in 2014.

The cartel’s official production target is 30 million barrels a day, which would mean far more oil on the world market than is being consumed.

Also on Wednesday, the Energy Department reported a surprise increase in US crude supplies of 1.5 million barrels last week. Analysts were expecting a decline of 2.2 million barrels. Petrol stocks also increased more than expected.

Falling oil prices are making for sharply lower petrol, diesel, jet fuel and heating oil prices and giving consumers, shippers and airlines a lift.

Economists say lower petrol prices act like a tax cut, leaving more money in consumers’ pockets to spend on other things.

The Energy Department projected in a report on Tuesday that petrol will average $2.60 next year, 23 per cent below this year’s projected average. If that comes to pass, it will save a typical household $550 next year.

Lower oil prices are taking their toll on oil producers, though, sending company shares plummeting and forcing companies to cut spending.

BP said on Wednesday it would aim to cut costs by $1 billion next year, a move that would likely involve significant job cuts.