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Oil dropped below $45 a barrel in New York on Tuesday, dragging commodities to a 12year low, according to Bloomberg, with government bonds rising as the outlook for inflation dimmed, retailers led European stocks higher and the pound weakened against all of its major peers.

U.S. oil, down 2.5% to $44.90 in early Tuesday trades, has dropped more than 55% since June as the U.S. pumped more shale crude and OPEC resisted calls to cut production, stoking a global supply glut. Declining fuel prices has curbed inflation expectations, cutting the chance of an early Federal Reserve interest-rate increase while boosting speculation the European Central Bank will expand stimulus to ward off deflation.

“Crude is definitely leading the way down,” said Jeremy Baker, a senior commodity strategist at Harcourt Investment Consulting AG in Zurich. “There doesn’t seem to be any fundamental floor to crude oil prices at the moment. Falling prices will definitely have an economic benefit for U.S. consumers going forward.”

West Texas Intermediate oil extended losses after settling at the lowest level since April 2009 on Monday, while Brent crude slid 4% to $45.53 in London.

Oil extended its losses amid speculation that U.S. crude stockpiles will increase, exacerbating a global supply glut that’s driven prices to the lowest in more than 5 1/2 years.

U.S. crude inventories probably increased by 1.75 mln barrels last week to 384.1 mln barrels, a Bloomberg News survey showed before government data on Wednesday. The United Arab Emirates said it will stand by its plan to expand output capacity to 3.5 mln barrels a day in 2017 even with “unstable oil prices,” while shale drillers will probably be the first to curb production as prices fall, according to Energy Minister Suhail Al Mazrouei.

In the opposite direction to oil prices, gold rose 0.5% to $1,239.10 an ounce, the highest price since October 22, and silver jumped 2.1% to $16.9351.

U.S. natural gas increased 3.1% to $2.882 per mln British thermal units (BTU) after falling to a 28-month low in New York. European gas rose 1% in London.

The MSCI Emerging Markets Index added 0.2% as China’s exports beat estimates and oil’s decline spurred gains in consumerdiscretionary shares.

Goldman Sachs said crude needs to drop to $40 a barrel to “re-balance” the market, while Societe Generale also reduced its price forecasts.

“Prices continue to free-fall and there is little that can stop them,” Amrita Sen, chief analyst at consultants Energy Aspects in London, said in a report. “OPEC remains the only factor that can stabilise markets in the short term. But with the group out of the picture, the market is looking elsewhere for a tangible reaction.”

OPEC nations can withstand a drop in crude prices while “those who are producing the most expensive oil, the rationale and the rules of the market say that they should be the first to pull or reduce their production,” the UAE’s Al Mazrouei said on Tuesday.

OPEC, whose 12 members supply about 40% of the world’s oil, agreed to maintain their collective output target at 30 mln barrels a day at a November 27 meeting in Vienna. Qatar estimates the global surplus at 2 mln bpd.

In China, the world’s biggest oil consumer after the U.S., crude imports surged to a new high in December, capping a record for last year. Overseas purchases rose 19.5% from the previous month to 30.4 mln metric tons. For 2014, imports climbed 9.5% to 310 mln tons, or about 6.2 mln bpd.

Rather than cutting output to try to balance the market, OPEC producers are offering discounts to customers in an attempt to defend market share, a Reuters report said.

“The market is in a bit of a panic now and the momentum is really quite negative. We haven’t seen any actions or comments that could reduce this aggressive selling,” said Ole Hansen, senior commodity strategist at Saxo Bank.

“Although the overpowering supply and demand equation is already heavily-weighted in favour of the bears, the scales were further tipped in the same direction when industry forecasters announced they were lowering 2015 forecasts. This just renewed selling pressure on the commodity, where a floor remains to be in sight. It appears that Crude is on its way to $42, a level that many see as psychological support,” said Jameel Ahmad, Chief Market Analyst at forex broker ForexTime Ltd (FXTM).

“The continuing decline in oil prices is once again pressuring energy stocks, which is consequently having a domino effect and also leading to a decline in global stocks. In a pattern we are continuing to see, global stocks pointing to the downside have increased investor attraction towards the JPY with the USDJPY pulling back to 117.734,” FXTM’s Ahmad said.

“The pressure on global stocks appears to be weighing on the USD which is reigniting interest in gold. After declining to $1217 on Monday having failed to break $1230, the metal has rebounded and is currently at $1238. If gold manages to break through this level, we could be looking at gains towards $1250,” he added.