U.S. crude closes under $40 a barrel to breach long-time low

The price of U.S. crude oil closed under $40 a barrel on Monday for the first time since the days of the global economic crisis on fears of a slowdown in the world economy.

Already trading at six-year lows on a prolonged slump, U.S. crude fell $2.21 to finish at $38.24 per barrel. Oil hadn’t closed below $40 since February 2009, although it briefly traded below that level on Friday. Monday’s closing price was the lowest since Feb. 18, 2009.

Brent crude, a benchmark for international oils used by many U.S. refineries, slipped $2.77 to $42.69 Monday and is at its lowest level since March 2009.

Signs are mounting that growth in China, the second-largest economy in the world, is slowing down. That’s making investors worry more and more about the health of the world economy, and those fears led to a sell-off in stocks Friday and again on Monday, when China’s main stock market took its biggest dive in eight years. The Dow Jones industrial average spent the day far in the red, losing almost 600 points.

The U.S. has ramped up oil production to historic levels over the last few years while OPEC countries continued to churn out crude. Supplies have built up and growth in the world economy has been slow, with China’s economy losing steam and Japan’s shrinking. That resulted in a supply glut that has punished oil prices: the price of U.S. crude has fallen about 60 percent over the last year.

U.S. crude averaged more than $90 a barrel from 2011 through 2014. Its price has fallen for eight straight weeks, the longest slump in almost 30 years.

“This does not bode well,” said Karr Ingham, the Amarillo-based economist for the Texas Alliance of Energy Producers. “The momentum is downward and we’re not that far from getting into the 20s. I think that is a realistic expectation.”

Ingham said the posted price for West Texas Intermediate, not the futures price reported on the stock exchange, moved below $40 on Aug. 11 and has stayed there ever since. The last time it went below $40 was March 2009, he said. He was expecting the posted price to drop below $35 on Monday.

“There is nothing you can point to out there that says we can expect higher crude oil prices,” he said.

Staff writer Max B. Baker contributed to this report.

This story was originally published August 24, 2015 at 6:56 PM with the headline "U.S. crude closes under $40 a barrel to breach long-time low."