Oil closes at fresh 6-year low below $42 US a barrel
Crude oil prices have plunged by more than half since last summer
A key price benchmark for oil closed at a new 6½-year low on Monday as the global crude glut shows no sign of ending soon.
The September contract for West Texas Intermediate settled at $41.87 US a barrel, off 63 cents from Friday's close.
It was the lowest closing price for light sweet crude since March 2009.
Oil dipped as low as $41.35 in intraday trading on the New York Mercantile Exchange last Friday, but ultimately recovered to settle above $42. Not today.
The energy subgroup on the TSX fell 1.9 per cent on the day and was the main reason why the S&P/TSX composite index shed 26 points on the day to close at 14,252.
Crude oil prices, which have plunged by more than half since last summer, are not expected to turn around anytime soon.
Analysts cite many reasons for the continuing slide. Japan, the world's third-biggest consumer of oil, reported Monday that its economy shrank at an annualized pace of 1.6 per cent in the second quarter. China's economy is also cooling.
"The general talk in the market is about the continued ripple effect from the Chinese devaluation," said David Thompson at energy-specialized commodities broker Powerhouse, in remarks quoted by Reuters.
The recently signed Iran nuclear deal is expected to allow that country to resume exports of oil to the rest of the world. That will add to the global supply glut.
The International Energy Agency, in its monthly report last week, said the global glut will last through 2016.
"While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016, suggesting global inventories will pile up further," the Paris-based IEA said.
Some analysts also say that with the summer driving season drawing to a close, refineries in the U.S and Europe will soon start their fall maintenance shutdowns, which will limit crude oil demand.
With files from Reuters