HOUSTON — Oil plunged below $38 per barrel early Monday as concerns about the world's economic health led to a dramatic selloff on markets and stock indexes around the world.
U.S. benchmark oil ended trading down $2.21 to $38.24 per barrel on the New York Mercantile Exchange. The contract fell as low as $37.75 per barrel in earlier trading before paring losses.
Monday's close was the first time oil has settled below $40 per barrel since 2009, though crude briefly traded below that mark Friday before settling higher.
Stock indexes across the world joined crude in a steep loss early Monday. The Dow Jones Industrial Average fell more than 1,000 points shortly after opening. By the time the markets closed, the Dow had lost 588.40 points while the Standard & Poor's index had lost 77.68 points.
The selloff was sparked by continuing fears that China's economy is slowing. Chinese officials have recently devalued the country's currency and taken other steps to shore up its banks and businesses, but those steps haven't calmed the markets. The country's Shanghai Composite fell about 8.5 percent Monday.
China's idling economy has had an outsized impact on the crude oil markets. The country is the second-largest consumer of oil, and without its traditionally strong demand growth, traders have worried that the oil glut drowning markets could take even longer to clear.
The oil narrative has shifted from issues of oversupply to include greater fears about global economic concerns, said Bill Herbert, an analyst at Simmons & Co. International in Houston.
"Supply will eventually self-correct, but demand is a different issue with concerns of a possible global recession," Herbert said.
China's struggles are leading the way, he said, but oil producers like Brazil and Russia also are suffering, as well as smaller emerging markets like Kazakhstan.
Everyone previously expected oil to modestly rebound in the second half of this year, Herbert said, and the "relapse" virtually assures that will not happen. Cutting oil production will eventually help oil prices rebound in the next couple of years or so, he said, but the outlook is "opaque or threatening" for at least the next six months.