Investing.com - Oil prices held near the lowest levels in more than a decade on Monday, as further turmoil in the Chinese stock market added to concerns over the Asian nation’s economy.
The Shanghai Composite Index closed down 5.3%, the smaller Shenzhen Composite Index sank 6.6% and the CSI300 Index lost 5%, despite efforts by Beijing to stabilize the market. Last week, the Shanghai Composite lost all of its 2015 gains, falling by 10% in just five days.
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 oil demand will decline.
China 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 March delivery dropped 82 cents, or 2.42%, to trade at $33.11 a barrel as of 08:45 GMT, or 3:45AM ET, after sinking to a session low of $32.83. Prices hit $32.16 on January 7, a level not seen since April 2004.
London-traded Brent futures tumbled $4.30, or 10.01%, last week, as a meltdown on China’s stock market and a rapid depreciation of the yuan rattled investor sentiment.
Elsewhere, crude oil for delivery in February on the New York Mercantile Exchange slumped 62 cents, or 1.88%, to trade at $32.53 a barrel. It earlier fell to $32.25, not far from last week’s 13-year low of $32.10.
Last week, New York-traded oil futures plunged $4.44, or 10.48%, its 11th losing week of the last 13.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at 58 cents, compared to a gap of 39 cents by close of trade on Friday.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by the Organization of the Petroleum Exporting Countries last year not to cut production in order to defend market share.
Most market analysts expect a global glut to worsen this year due to soaring production in North America, Saudi Arabia and Russia.
Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.