Crude oil prices sank today after a plunge in Chinese equities raised fresh fears about China's faltering economy, the largest consumer of energy, and its impact on the global economy.
The Shanghai stock market's 8.5 per cent dive today, its steepest in eight years, roiled markets worldwide, hammering stocks, the dollar and commodities.
Oil prices struck new six-year lows in the sell-off as concerns mounted about demand in China, the world's second-largest economy and consumer of crude oil after the United States.
"The petroleum markets are extending last week's decline along with global equity markets on Monday as worries over slowing Chinese economic growth intensified," said Tim Evans, energy markets strategist at Citi Futures.
"The drop in prices is also sparking some bargain hunting that has helped trim losses, but it's far from clear that a bottom is at hand."
Around 1530 GMT, US benchmark West Texas Intermediate (WTI) for October delivery was down USD 1.82 at USD 38.63 a barrel, striking a level last seen in February 2009.
Brent North Sea crude for October, the international benchmark, plummeted USd 2.18 to USd 43.28 a barrel in London, its lowest level since March of that year.
"For the first time since March 2009, Brent costs less than USD 45 per barrel and WTI less than USD 40 per barrel," said Commerzbank analysts in a research note to clients.
"There is no end in sight to the nosedive that oil prices have been experiencing for eight weeks now. As far as today's price slide is concerned at least, fundamental data play only a subordinate role, as concerns about China are chiefly responsible this time."
Bart Melek, head of commodity strategy at TD Securities, said the oil market was getting clobbered from two sides: The outlook for demand was weakened by China's woes and there was no sign of easing in the global oversupply.
"We continue to be worried about new Iranian supplies, US drilling activity increasing, maintenance season coming up for refineries... That basically prompts people to think the oil market is going to be oversupplied for longer," said Melek.
On Friday, WTI had plunged briefly below USD 40 on the back of a global equities sell-off spurred by poor Chinese manufacturing data.
Amid market turmoil over China's faltering economy, WTI shed 4.8 per cent last week and Brent slumped 7.3 per cent.
It was WTI's eighth consecutive weekly decline, the longest stretch of weekly losses in 29 years, and Brent's seventh loss in eight weeks.
"China's financial crisis has rattled global equity and commodity markets," said Myrto Sokou, senior research analyst at the Sucden Financial brokerage in London.
"Oil investors remain highly cautious following renewed worries over a serious slowdown of Asian oil demand in the second half of 2015," she said.
