Investing.com -- U.S. crude plunged under $38 on Monday, as weak demand in China reverberated throughout energy markets worldwide pushing future prices to fresh lows previously not experienced since the height of the Financial Crisis.
On the New York Mercantile Exchange, WTI crude for October delivery traded in a broad range between $37.78 and $40.48 a barrel before settling at $38.16, down 2.31 or 5.72% on the session. Texas Long Sweet futures remain down by more than 20% over the last month of trading, amid a glut of oversupply on global markets. On Monday, WTI crude future contracts for the month of October fell to their lowest level on record.
On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $42.53 and $45.47 a barrel before closing at $42.62, down 2.85 or 6.24% on the day. The spread between the international and U.S. benchmark for crude stood at $4.46, below Friday's level of $5.01 at the close.
On Monday, a lack of activity from the People's Bank of China spooked equity markets worldwide as the fallout continued from the release of disappointing manufacturing data late last week. Chinese index futures fell by their limit of 10%, providing strong indications that the downturn will continue. Last Friday's weak manufacturing reading, its lowest in six years, underscores persistent sluggishness in the world's second-largest economy. Although Chinese GDP grew by 7% over the first half of 2015, many analysts believe China's economy is decelerating and could suffer its slowest full-year growth in a quarter century.
China is the world's second-largest importer of oil beyond the U.S. The Asian nation imports more than 5.65 million barrels of crude oil per day, according to the latest estimates from the CIA World Factbook, more than Germany, Italy and France combined.
Monday's sell-off came one day after Iran oil minister Bijan Zanganeh told news agency Shana that an emergency OPEC meeting might be effective in stabilizing oil prices. OPEC is not scheduled to meet again until early-December. Earlier this month, Algerian officials wrote to OPEC to request a similar meeting in an effort to stem the second severe decline in crude prices this year.
Last week, U.S. crude futures fell for an eighth consecutive week marking the longest streak of weekly declines in nearly 30 years. Meanwhile, the U.S. Energy Information (EIA) said in its Weekly Petroleum Status Report that U.S. crude stockpiles increased by 2.6 million for the week ending on August 14, posting its highest weekly build since April. At 456.2 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years.
Although U.S. crude production remains near 40-year highs, it has fallen considerably since the spring amid slower output among shale producers. For September, U.S. shale producers expect its output to decrease for the fifth consecutive month. While Saudi Arabian output declined slightly in July, OPEC production overall still hovers near record-highs.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, plummeted more than 1.4% to an eight-month low of 93.47 in U.S. morning trading. While it rebounded slightly in the afternoon session, it fell back again near the close of oil markets to 93.50.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.