Crude oil prices fell to a fresh seven-month low and U.S. stock indexes slumped, as lingering concerns about global economic growth weighed on commodity and equity prices alike.
Traders work on the floor of the New York Stock Exchange last month.
International oil benchmark Brent Crude fell more than 4% to about $74 per barrel by 9:45 a.m. EDT, registering its lowest price since Dec. 13, 2023, while U.S. benchmark West Texas Intermediate dipped more than 3% to below $71 per barrel, its cheapest price since Jan. 17, according to MarketWatch data.
The slump came after top oil importer China reported its fourth straight month of manufacturing declines and ahead of a slew of economic data in the U.S., including August manufacturing data due later Tuesday morning and August’s jobs report slated for Friday, a release which last month briefly sparked fears of an impending U.S. recession.
Further driving concerns about China’s economic growth, and its related impact on global oil demand, was a Bank of America note warning about the “sputtering” Chinese economy’s weakening growth prospects, as BofA economists Claudio Irigoyen and Antonio Gabriel cut their forecast Tuesday for China’s 2024 gross domestic product growth from 5% to 4.8% and for 2025 and 2026 economic growth from 5% to 4.8% apiece.
“Demand worries linked to the threat of a slowdown in global growth are acting as the biggest influence on the oil market right now,” remarked Sevens Report analyst Tom Essaye in a Tuesday note to clients.
Also declining Friday were American equities, with the S&P 500 and tech-heavy Nasdaq falling 0.8% and 1.2%, respectively, shortly after regular trading opened.
The stock slump, particularly modest considering the S&P has returned a blistering 19% year-to-date, evokes some less than stellar memories of Septembers past. The leading U.S. index fell 3.9% in Sept. 2020, 4.8% in Sept. 2021, Sept. 9.3% in 2022 and 4.9% in Sept. 2023, working out to an average decline of 5.7% for the S&P in the month over the last four years.
Though lower crude oil prices are often a welcome development for consumers as they frontrun lower gasoline prices for drivers, they can be a bad omen for the broader economy as it indicates prospects of a broader slowdown as companies, consumers and governments tighten their belts. Brent crude prices fell 62% in 2008, during the global financial crisis, and 24% in 2020, amid the dredges of the COVID-19 pandemic. Americans are already paying less at the pump than they did in the recent past, with Tuesday’s average gas prices of $3.33 per gallon down from $3.48 a month ago and $3.82 a year ago, according to AAA, helping push inflation down.
Other than the most pressing issue of economic growth, financial markets also are calibrating to November’s closely contested U.S. presidential election. “Given the pretty divergent proposals from the two candidates, this election is going to be one of the biggest issues for markets over the next two months,” Deutsche Bank strategist Jim Reid remarked to clients Tuesday.