US oil finishes below $40 for first time since 2009
Worker in front of an oil rig (Shutterstock)

Oil prices sank Monday, with the US crude benchmark finishing below $40 a barrel for the first time in six years on worries about China's weakening economy after an equities sell-off.

US benchmark West Texas Intermediate (WTI) for October delivery dropped $2.21 to $38.24 a barrel on the New York Mercantile Exchange, its first below-$40 close since February 2009.

Brent North Sea crude for October, the international benchmark, plummeted $2.80 to $42.69 a barrel in London, its lowest level since March 2009.

"The petroleum markets are extending last week's decline along with global equity markets on Monday as worries over slowing Chinese economic growth intensified," said Tim Evans, energy markets strategist at Ciri Futures.

Financial markets endured one of their worst days since the 2008 financial crisis, starting with a rout in Asian bourses on mounting fears that China's slowing economy will drag down the global economy with it. European and US stocks joined the sharp sell-off, and commodities were hammered.

The catalyst was the Shanghai stock market's 8.5 percent plunge, its sharpest one-day fall in eight years, despite Chinese government efforts to stem market turmoil on markets since mid-June.

"These jitters over China -- if you think they're bad for the US equity market, they're even worse for the global oil market," said John Killduff of Again Capital.

Killduff said the issue of an economic slowdown in China, the world's second-largest economy and crude-oil consumer, "goes right to the heart of the matter" as far as demand for oil and other commodities.

He estimated that the WTI contract had further to fall. "I thought we'd be getting into the mid-$30s. Now I think we'll be getting into the mid-$20s," he said.

Bart Melek, head of commodity strategy at TD Securities, said the oil market was getting clobbered from two sides: The outlook for demand was weakened by China's woes and there was no sign of easing in the global oversupply.

"We continue to be worried about new Iranian supplies, US drilling activity increasing, maintenance season coming up for refineries... that basically prompts people to think the oil market is going to be oversupplied for longer," said Melek.