[NEW YORK] Oil's weeks-long slump accelerated sharply on Monday with prices tumbling as much as 6 per cent 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-per cent fall 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 slide, but a second wave of selling re-emerged in the afternoon.
Oil's biggest one-day drop 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 US$2.77, or 6.1 per cent, to settle at US$42.69 a barrel but fell to a contract low of US$42.23 in post-settlement trading, the lowest front-month price since March 2009.
Prices extended losses in after-hours trading, as the US S&P Index fell by more than 4 per cent at one point.
US October crude fell US$2.21 or 5.5 per cent to settle at US$38.24, the lowest since February 2009. The US$37.75 session and contract low was the lowest since February 2009.
US crude, on pace for a 18 per cent monthly loss, posted its eighth consecutive weekly loss on Friday, the longest weekly losing streak since 1986.
Oil's more nearly 40 per cent slump since its late-June high 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 markets, with many raw materials plumbing new lows. The 19-commodity Thomson Reuters/Core Commodity CRB Index dropped nearly 2.7 per cent to its lowest since late 2002. "Macro factors are currently dominating micro factors in the oil market," analysts at Standard Chartered said in a report.
The focus on macro affairs has, for the moment, taken traders' minds off of the looming slowdown in crude demand this autumn, when refiners shut for seasonal work. US oil inventories likely rose by 2.2 million barrels last week, extending an early build-up in excess supplies.