Crude prices inched higher on Wednesday after Iran said it was ready to negotiate with rival Saudi Arabia over the current market conditions.

The Iranian move came after oil prices plunged around 8 percent on Tuesday.

"We support any form of dialogue and cooperation with OPEC member states including Saudi Arabia," Iran's Press TV reported.

The front-month Brent contract was 75 cents, or 2.5 percent, higher at $31.07 a barrel in the morning trade.

Prices hit the lowest level in more than 12 years on Tuesday following weak demand forecasts from the US government and Paris-based International Energy Agency.

Brent crude plunged $2.56, or 7.8 percent, at $30.32 a barrel, the largest drop in a day for Brent since September 1 and hitting a near 12-and a half year low. US crude dropped $1.75, or 5.9 percent, to end at $27.94.

The sharp fall in prices, which are in a free fall, came after the US Energy Information Administration (EIA) lowered its oil demand growth forecast for the next two years.

Before that, energy watchdog International Energy Agency (IEA) said a supply glut was to remain for most of 2016. The agency said while the Organisation of Petroleum Exporting Countries (OPEC) was unlikely to reduce output, a decline in US output would also take time to materialize.

"The IEA report was a bearish blow, followed by the EIA report, which sings from the same hymn sheet," Matt Smith, director of commodity research at energy data provider ClipperData, told Reuters.