Crude prices fell more than 2% in early Asian trade Monday as volatility in the Chinese stock market and worries about the Chinese economy keep investors feeling bearish, according to The Wall Street Journal.
Regional stock markets also started the week lower. The Shanghai Composite Index fell 2.5% to 3106.99, while the Shenzhen Composite Index was 3.3% lower after a modest recovery on Friday, according to the report.
In Hong Kong, the Hang Seng Index fell 2.4% and a gauge of Chinese firms listed in the city fell 3.25%.
Oil prices kicked off the new year last week in a slump. Prices were dragged by fears that the escalating tension in the Middle East will deter oil producers from cutting production. Prices sank further after the Chinese government last week allowed its currency to fall at a quicker rate than expected, triggering a rapid selloff in the stock market.
According to Australia and New Zealand Banking Group, concerns over the impact of a depreciating Chinese currency will keep pressuring commodity prices lower in the short term.
"The global glut issue has been around for a while. Right now, it is the fear of a Chinese slowdown that is spooking the market," said Barnabas Gan, a commodity analyst at OCBC.
"Most of the selling is based on emotions and panics," he added.
News that the Saudi government may be considering an initial public offering for its state-run oil company is also dampening sentiment, he said.
Most analysts agree a price recovery is still a long way away but the more bullish ones believe prices are stabilizing amid signs of shrinking production, The Wall Street Journal reported.
According to industry group Baker Hughes, the U.S. oil-rig count, which is viewed as a proxy for drilling activity, fell by 20 to 516 in the latest week.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $32.41 a barrel at 0141 GMT, down $0.78 or 2.4% in the Globex electronic session. February Brent crude on London's ICE Futures exchange fell $0.72 or 2.2% to $32.83 a barrel. Both grades have fallen over 11% this week so far.