Investing.com - Crude oil futures traded at the lowest level in more than six years on Tuesday, as steep declines on China's stock market rattled investors' confidence.
The Shanghai Composite tumbled 6% in volatile trade on Tuesday, with losses accelerating towards the end of the session despite fresh efforts by the government to calm the market.
China’s central bank injected the largest amount of cash into the financial system on a single-day basis in almost 19 months in an effort to offset outflows in the wake of a weaker yuan.
Market players are concerned that the plunge in the stock market could spread to other parts of the Chinese economy, triggering fears that the Asian nation's demand for oil will decline.
Worries that China’s recent devaluation of the yuan will slow down the country’s import of oil also weighed.
The Asian nation is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
On the ICE Futures Exchange in London, Brent oil for October delivery hit an intraday low of $48.25 a barrel, the lowest level since January 14, before trading at $48.45 during European morning hours, down 29 cents, or 0.58%.
A day earlier, London-traded Brent prices lost 45 cents, or 0.91%, to end at $48.74 amid lingering concerns over a global supply glut.
Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.
Elsewhere, crude oil for delivery in October on the New York Mercantile Exchange declined 34 cents, or 0.8%, to trade at $42.07 a barrel after falling to a session low of $41.43, the weakest level since March 2009.
Market players looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report Tuesday, while Wednesday’s government report could show crude stockpiles fell by 1.6 million barrels in the week ended August 14.
On Monday, Nymex oil dropped 63 cents, or 1.48%, to close at $41.87 as worries over high domestic U.S. oil production weighed.
According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. increased by two last week to 672, the fourth straight weekly gain.
There are still about 60% fewer rigs working since a peak of 1,609 in October, though the pace of declines has slowed considerably in recent weeks, fueling concerns that U.S. shale production could rebound in the months ahead.
Meanwhile, the spread between the Brent and the WTI crude contracts stood at $6.38 a barrel, compared to $6.87 by close of trade on Monday.