Oil market slumps under $39 on China, oversupply

World oil prices sank to 6.5-year lows on Monday, with New York crude sliding under $39 on fears over Chinese energy demand and global oversupply.

US benchmark West Texas Intermediate (WTI) for October delivery tumbled to $38.69, striking a level last seen in February 2009.

Brent North Sea crude for October dived in morning London deals to $43.28, last seen in mid-March of the same year.

"For the first time since March 2009, Brent costs less than $45 per barrel and WTI less than $40 per barrel," said Commerzbank analysts in a research note to clients.

"There is no end in sight to the nose dive that oil prices have been experiencing for eight weeks now.

"As far as today's price slide is concerned at least, fundamental data play only a subordinate role, as concerns about China are chiefly responsible this time."

Chinese equities plunged further Monday, sparking a fresh rout on global markets as Beijing's latest intervention failed to boost investor sentiment over China's slowing economy.

Beijing announced over the weekend that its state pension fund -- which had 3.5 trillion yuan of assets at the end of 2014 -- will be allowed to buy stocks, in the latest attempt to calm the market.

However, Shanghai stocks tumbled almost 8.50 percent in value, wiping out this year's gains and sparking heavy losses in Asia and Europe, as investors remained gripped by panic.

Before the weekend, WTI prices had plunged briefly below $40 on the back of a global equities selloff rooted in poor Chinese manufacturing data.

Concerns that growth is decelerating in the world's number-two economy were fuelled on Friday when the preliminary figure for Caixin's purchasing managers' index for August, a key indicator of manufacturing activity, slumped to a 77-month low.

"China's financial crisis has rattled global equity and commodity markets," said Myrto Sokou, senior research analyst at the Sucden Financial brokerage in London.

"Investors are worried about the knock-on effects for global economy."

She added: "Oil investors remain highly cautious following renewed worries over a serious slowdown of Asian oil demand in the second half of 2015."

In early afternoon trade, WTI pulled back slightly to stand at $38.95, down $1.50 from Friday's closing level. Brent was $1.72 lower at $43.74.