Oil prices hit 6-1/2-year lows on Monday after Chinese stock markets suffered their biggest one-day fall since the global financial crisis, intensifying worries over the outlook for global oil demand.
Inaction by the Chinese government following an 11 percent rout in local stock markets last week encouraged a free-fall in global equities and other commodities on Monday. “Today's falls are not about oil market fundamentals. It's all about China,” Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum.
“The fear is of a hard landing and that things get out of the control of the Chinese authorities.” Brent oil was trading down $1.20, or 2.6 percent, at $44.26 a barrel at 0750 GMT, after hitting an intraday low of $44.00, its weakest since March 2009. U.S. light crude was down $1.15, or 2.8 percent, to $39.30 a barrel after hitting a low of $39.00. Steep losses last week capped the contract's longest weekly losing streak since 1986. U.S. crude is now almost 17 percent below its opening price at the start of the month and Brent is down more than 10 percent.
Read MoreIn a sharp reversal, Gartman turns bullish on oil Multi-year lows in oil prices have so far failed to trigger any action from the world's biggest producers to rein in output. However, Iran's Oil Minister Bijan Zanganeh said on Sunday that holding an emergency OPEC meeting could be “effective” in stabilising the oil prices, Iran's oil ministry news agency Shana reported.
There was a similar call by Algeria earlier this month, but other OPEC delegates said no meeting was planned. “Supply-side news continues to dominate the market … Fears of surging Iranian oil are likely to increase further after Iran's oil minister stated the country had plans to raise oil production at any cost,” ANZ said in a note on Monday.
In a sign that relations between Iran and Western powers are improving, Britain reopened its Tehran embassy on Sunday. Several oil and gas companies, including representative from Shell, travelled to Iran with foreign minister Philip Hammond.