The plunge in oil prices continued on Monday, in line
with the selloff in wider financial markets, as market players were taken aback by
the rout in Chinese equity markets and fears about global economic
growth.
Light, sweet crude futures for delivery in October declined below $39 a barrel on the New York Mercantile Exchange, setting it on track to close below that level for the first time since February 2009. It was down $1.61, or 4%, at $38.84 a barrel, in midmorning European trading hours.
October Brent crude on London’s ICE Futures exchange fell $1.96, or 4.3%, to $43.51 a barrel, dropping below the $45-a-barrel mark for the first time since March 2009. It is now trading more than 55% lower from its one-year high of $103.19 a barrel reached in August last year.
During several months, oil prices have been under pressure because of oversupply concerns. The drop deepened in recent weeks on fears that the Chinese economy shrank more than expected and may have a negative impact on global markets.
The Asian nation is the world’s largest consumer of commodities, and second-largest consumer of oil. Its demand for most commodities has fallen steeply since the world’s second-largest economy started showing signs of losing momentum. However, its demand for oil has held up much stronger than other commodities, aided by stockpiling. A drop in Chinese oil imports would be catastrophic for the oil market, as prices are already extremely weak.
The recent devaluation of the renminbi also added to market jitters, spurring concerns that China’s oil and commodities imports could fall further.
Equity markets in China were steeply down again Monday, wiping out
all of this year’s gains, following a sharp fall in global equity
markets last week.
The Shanghai Composite Index closed 8.5% lower, marking its worst one-day percentage performance since February 2007.
