Oil price hits 12-year low

World oil prices fell to their lowest levels in 12 years Thursday as China's market turmoil heightened worries about the state of the world's second-largest consumer of crude oil.

US benchmark West Texas Intermediate for February delivery fell 70 cents, or 2.1 percent, to finish $33.27 a barrel on the New York Stock Exchange. WTI had hit a low of $32.10 in early European trading, a level last seen in December 2003.

In London, European benchmark Brent North Sea crude oil for February fell 48 cents (1.4 percent) to $33.75 a barrel. Earlier Brent had fallen to $32.16, its lowest level since April 2004.

Tim Evans of Citi Futures said the selloff came after "a sharp seven percent drop in Chinese equities triggered a much wider risk-off trade flow, with investors around the world increasingly worried."

"The market has been able to recover on bargain hunting at the lower levels, suggesting its sufficiently oversold to shift into consolidation mode, but we see the market as remaining fundamentally fragile, with the return of Iranian barrels currently held back by sanctions still to come," Evans said.

Prices have fallen sharply since the beginning of the New Year on China worries but also in part due to fears that the ongoing row between key producers Iran and Saudi Arabia would dim prospects for output cuts.

The Organization of the Petroleum Exporting Countries, which includes those countries, effectively dropped output limits in early December, despite the global oversupply.