Global oil prices have plunged to below USD 28 a barrel for the first time in past 12 years as a result of gloomy economic forecasts as well as continued economic slowdown in China and abundant crude supplies.

During morning deals on Wednesday, US benchmark West Texas Intermediate (WTI) for February delivery was sold for USD 27.32 per barrel, a level which had not been seen since September 24, 2003, AFP reported.

Of course, the figure later stood at USD 27.80, showing a decrease of 66 cents compared to Tuesday's closing level.

Approaching midday in London, Brent North Sea crude for delivery in March shed 67 cents to hit USD 28.09 compared with the close on Tuesday. Brent had fallen to USD 27.67 on Tuesday, a low last witnessed on November 25, 2003.

Downward pressure on the global oil market has increased further after the International Energy Agency (IEA) warned on Tuesday that the oil market could "drown in oversupply."

Prices have fallen by about 75 percent since mid-2014, hit by lingering supply glut, the general slowdown in global economy and the rising value of US dollar.

"A stronger dollar continues to present significant headwinds and supply increases show little sign of letting up any time soon," said Sucden analyst, Kash Kamal, who added, "This is very much a supply issue, as global demand has on the whole been quite healthy -- but it is likely we will see additional price declines and tighter margins before producers are prompted to cut output."

The gain in dollar makes dollar-priced crude more expensive for customers that use weaker currencies, while denting demand and prices.

Crude futures are also in free fall as the supply glut seems to be worsening after Iran, a heavyweight member of the Organization of the Petroleum Exporting Countries (OPEC) announced it was going to pump out extra barrels after the lifting of Western sanctions on Tehran.

The IEA predicted on Tuesday that oil prices would fall further this year as market supply is expected to greatly exceed demand. The Agency noted that a return to the market by Iran as a major oil exporter will offset any production cuts from other countries.