Oil's weeks-long slump accelerated sharply on Monday with prices tumbling more than 5 percent to fresh 6-1/2-year lows as a renewed dive in the Chinese equities market sent global financial markets into a tailspin. A near 9-percent tumble in China shares roiled global markets and sent the Dow Jones Industrial Average down more than 1,000 points in early trading. Wall Street pared losses by mid-morning, briefly easing oil's losses, but a second wave of selling re-emerged in the afternoon.
Oil's biggest one-day slide in nearly two months suggested that worst-case fears over the economic outlook in China, the world's second-largest oil consumer, have eclipsed immediate signs of persistent oversupply as the main motivator. "Today's falls are not about oil market fundamentals. It's all about China," Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. "The fear is of a hard landing and that things get out of the control of the Chinese authorities."
Brent October crude fell $2.77, or 6.1 percent, to settle at $42.69 a barrel, after plunging to a contract low of $42.51, the lowest front-month price since March 2009. US October crude was down $2.21 or 5.5 percent at $38.24, the lowest since February 2009. US crude, on pace for a 17 percent monthly loss, posted its eighth consecutive weekly loss on Friday, the longest weekly losing streak since 1986. Oil's more nearly 40 percent slump since its high in late June has set off alarm bells among some hard-hit members of Opec, triggering some talk of an emergency meeting, although even most Gulf members see that as unlikely. The sentiment-driven slump took a toll across the financial markets, with many raw materials plumbing new lows. The 19-commodity Thomson Reuters/Core Commodity CRB Index dropped nearly 2.7 percent to its lowest since late 2002.
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