Oil closes just above US$38

The price of US oil closed under US$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, US crude fell US$2.21 to finish at US$38.24 per barrel. Oil hadn't closed below US$40 since February 2009, although it briefly traded below that level on Friday. Monday's closing price was the lowest since February 18, 2009.

Brent crude, a benchmark for international oils used by many US refineries, slipped US$2.77 to US$42.69 Monday and is at its lowest levels 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 589 points at market close.

The US 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 US crude has fallen about 60 per cent over the last year.

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

The decline in oil prices has hit the energy sector hard, and oil and gas and oilfield services companies were some of the biggest losers on the S&P 500 index during Monday's plunge.

The hardest-hit stocks included Newfield Exploration Company, which fell about 10 per cent and took the largest loss on the S&P 500, along with Cabot Oil & Gas Company, Marathon Oil Corp, Baker Hughes Inc, Hess Corp, ConocoPhillips, BP Plc and Exxon Mobil Corp.