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A tanker truck leaves an oil shipping depot, passing over a string of tankers on a rail line, in New Town, N.D., May 29, 2014. Oil prices have been falling steadily for several months, as rising U.S. production has added to ample international supply at a time of modest growth in the global economy.Jim Wilson/The New York Times

Crude prices in North America took another tumble, sinking to four-year lows as Saudi Arabia signalled it would cut prices in North America and a stronger U.S. dollar led to an overall flight from commodities.

"This is a market that continues to search for a bottom," said Gene McGillian, senior analyst at Tradition Energy, a Stamford, Ct.-based consulting firm. "You have a combination of factors that are steadily depressing the price of oil," he said, including news Monday that Saudi Aramco was looking to cut its price in the U.S. for the second month in a row.

On Tuesday, by early afternoon London time, a barrel of benchmark crude was down $2.07, or 2.6 per cent, at $76.79, its lowest level since September, 2010. Meanwhile, Brent crude was down $2.14, or 2.5 per cent, at $82.63 a barrel, its lowest level since October, 2010.

Oil prices have been falling steadily for several months, as rising U.S. production has added to ample international supply at a time of modest growth in the global economy.

Traders will now be looking to the meeting later this month of the Organization of Petroleum Exporting Countries for signs that OPEC will cut production to defend prices. However, there are concerns that the biggest producers – including Saudi Arabia – are more interested in protecting their market share and are willing to see further price declines to drive high-cost producers out of the market.

In trading on Monday, the North American benchmark West Texas intermediate fell $1.76 to $78.78 (U.S.) a barrel after Saudi Aramco – the kingdom's state-owned oil company – said it would cut prices on all grades it sells in North America.

However, the Saudis raised prices in Asia, where it had been offering steep discounts.

West Texas intermediate – which traded as low as $78.14 on Monday – fell by 12 per cent in October and is down 20 per cent this year. North Sea Brent – a key international benchmark – declined $1.08 to $84.78 (U.S.) a barrel in London futures markets; it topped $115 (U.S.) a barrel in June.

The strength in the U.S. dollar and drop in crude prices washed through the Canadian market, as the Canadian dollar continued its retreat, losing 0.72 cents to 88.01 cents and the Toronto Stock Exchange's energy-heavy S&P index down 75 points to 14,537. The weaker loonie has provided some cushion for Canadian oil producers. But in equity trading Monday, the major Canadian oil companies lost ground, including Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc. and Imperial Oil Ltd.

If West Texas intermediate prices stay below $80 a barrel, producers in Alberta's oil sands and the United States' tight oil plays such as the Bakken and Permian will likely rein in their expansion plans, though they are not expected to curtail current production. The U.S. producers are more at risk from short-term price slumps because they need to keep drilling in order to offset steep production-decline rates in their existing wells. So far, however, drilling activity has held up.

Mr. McGillian said energy markets are facing a triple whammy – fast-rising North American production, weaker-than-expected demand in Europe and China, and a rising U.S. dollar that tends to put downward pressure on commodity prices.

As a result, traders are watching OPEC for signs that it will exert some market discipline.

"Until the Saudis come out with a definitive indication of the production cut, we're going to see some more downside risk here," said Jim Ritterbusch of Ritterbusch & Associates. "They'll have to [make production cuts]. It may not be at the end of this month at their meeting, but by the end of the year, they'll reach a pain threshold and they'll be forced to do something."

Amrita Sen, economist at London-based Energy Aspects, said traders remain focused on oversupply, even as demand is starting to pick up and production falling off.

"Oil markets are at a crossroads for now, torn between improving end user demand on the one hand and high supplies plus OPEC's laissez-faire attitude towards falling prices on the other," she wrote in a note Tuesday.

Clearly, the European Union's cut in its 2014 growth forecast to 0.8 per cent from 1.2 per cent underscored the ongoing weakness in demand.

But Ms. Sen said production is slowing in West Africa and the former Soviet Union countries.

"While the focus is on oversupply, the market is a lot tighter now than it was a few weeks ago," she said.

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