World oil prices dived last week close to a seven-year low propelled downward by global oversupply and the strong dollar after last week's US interest rate hike.

"The oversupply on the oil market is weighing heavily on prices" said Commerzbank analyst Eugen Weinberg.

US benchmark West Texas Intermediate for delivery in January tumbled to $34.39 a barrel on Friday - touching the lowest since February 18 2009.

Prices have been plagued by oversupply woes ever since the Opec left its output ceiling unchanged earlier this month despite a market collapse that has ravaged its members' revenues.

"This justified fear of an oil glut is continually causing new lows" said analyst Connor Campbell a trading firm Spreadex.

Brent crude had plunged on Monday to $36.33 per barrel last witnessed on December 24 2008 and skirted close to this level on Friday.

Last week Brent has traded dangerously close to its lowest point in almost 11 years.

The market has been pummelled as producers including the Opec continue pumping despite depressed prices and anaemic global demand - as group members look to maintain market share by pushing aside non-Opec members.

"Oil appears likely to remain quite volatile into the end of the year" said Oanda trading group analyst Craig Erlam.

"A break of $36.20 would see Brent trading at its lowest levels since July 2004 and could prompt a move back towards $33-34."

Adding to the commodity's woes is the US Federal Reserve's decision on Wednesday to raise benchmark interest rates for the first time in nine years boosting the dollar and thus making crude more expensive for buyers with weaker currencies.

The dollar soared on Wednesday after the US central bank lifted its benchmark federal funds rate locked near zero since the 2008 financial crisis by a quarter point to 0.25-0.50 per cent saying the US economy is growing solidly.

"WTI sinking further below $35... is likely the result of the strengthening dollar" said Daniel Ang investment analyst at Phillip Futures in Singapore.

"In addition to this Brent's January 2016 contract has expired which is causing spread traders to close off their WTI January 2016 contract positions."

Gene McGillian broker and analyst at Tradition Energy said oil prices will probably test 2008 lows which would bring WTI to the vicinity of $32 a barrel.

"Until we see signs that production is basically beginning to come down somewhere in the world... that the economic activity is going to pick up and boost fuel demand the market is going to remain at these low levels and grind towards those areas we bottomed at during the Great Recession."

The 13-nation Organisation of the Petroleum Exporting Countries decided against slashing high output levels in the face of oversupply that has battered the market.

Despite oil prices plunging by more than 60 per cent over the previous 18 months the Opec defied calls to reduce output at its meeting on December 4. - AFP

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