Oil slides to 6-year low as commodities tumble

Oil plummeted more than 6 per cent to levels last seen during the financial crisis and a broad index of commodity prices slid to the lowest point of this century as economic doubts gathered over China, the engine room of demand growth over the past decade.

China is the world’s largest importer of raw materials and the biggest energy consumer globally.

Mounting signs of a sputtering economy, including a plunge in the Shanghai equity market Monday, have raised the prospect of softer demand for oil and other commodities, removing another support for prices collapsing from plentiful supply.

Paul Gait, an analyst at Bernstein, said: “There’s panic and people are selling everything that sniffs of China.”

The latest dive in crude threatens to intensify the pain in oil-rich countries from Canada to Venezuela and hurt investors in the energy sector as producers test each others’ mettle amid a worldwide glut.

Brent, the international oil benchmark, late Monday dropped more than $3 a barrel, or 7.1 per cent, to as low as $42.23 a barrel, a level last touched in March 2009 when global oil use was contracting during the financial crisis.

The price of West Texas Intermediate oil, the US benchmark, fell $2.70 to a low of $37.75 a barrel — the weakest since February 2009.

The Bloomberg Commodity index, a 22-member basket holding commodities from wheat to natural gas, declined as much as 3 per cent cent to its lowest since 1999, having fallen almost 40 per cent in three years.

Pierre Andurand, a London-based energy hedge fund manager, said: “For commodities, the move downwards was led by excessive supplies, but now demand growth is a legitimate concern.”

US and European equities were all caught in the rout with miners and energy companies leading the fall.

If oil prices remain low, bankruptcies among higher-risk producers will accelerate, said Ben Tsocanos, energy analyst at Standard & Poor’s.

“It’s hard for most projects to make money at $40 (a barrel), at least in the current service cost environment,” Mr Tsocanos said.

Copper and aluminium prices fell to six-year lows and nickel, a metal used in stainless steel, fell 6.4 per cent on the London Metal Exchange. Gold remained relatively unscathed, declining only fractionally as investors clung to haven assets.