Oil prices plunged to new seven-year lows on Tuesday, dragging down global stocks in belated response to OPEC’s decision last week to keep crude prices elevated.
The price of West Texas Intermediate (WTI) crude, the US benchmark, fell 68 cents or 1.8% to $36.97 a barrel, its lowest level on the New York Mercantile Exchange since the 2008-2009 credit crunch.
Brent crude also fell 56 cents or 1.4% to $40.17 a barrel on ICE Futures Europe. The international benchmark had earlier fallen below $40 a barrel for the first time since March 2009.
With Tuesday’s drop, oil prices have fallen more than 7% since last Friday, when the Organization of the Petroleum Exporting Countries (OPEC) announced in Vienna that it would maintain its production target at over 30 million barrels per day. Despite signs of internal dissention, especially on how to accommodate Iranian barrels once western sanctions are lifted, the cartel rolled over its policy designed to squeeze US shale producers.
Plunging oil prices weighed on Wall Street on Monday, resulting in a triple-digit drop for the Dow Jones Industrial Average. The S&P 500 Index also fell sharply, with its energy component declining nearly 4%. American stock futures were trading sharply lower on Tuesday, with the Dow Jones mini down 200 points.
European stocks plunged across the board on Tuesday, with London’s FTSE 100 Index falling 1.2%. Frankfurt’s DAX Index posted a triple-digit decline, which translated into a 1.5% loss. The CAC 40 Index and Ibex 35 were each down more than 1.5%.
The pan-European STOXX 600 Index declined 1.9%.
Asian stocks also fell sharply after China reported a fifth consecutive drop in exports, raising expectations for additional stimulus from the country’s central bank.
In dollar terms, exports declined 6.8% in November from a year earlier, the General Administration of Customs said on Tuesday. That was well below median forecasts calling for a 5% drop. Exports had declined 6.9% in October.
Meanwhile, imports declined for a thirteenth consecutive month, albeit at a slower pace than in October. Imports slumped 8.7% in dollar terms, official data showed. This resulted in a narrowing of the trade surplus to $54.1 billion in November from $61.64 billion in October.
China’s Shanghai Composite Index fell 1.9%. The CSI 300 Index also declined 1.8%.
Hong Kong’s Hang Seng Index closed down 1.3%.
In Japan, the Nikkei 225 Index fell more than 200 points or 1%.