Energy companies closed sharply lower Monday, leading a broad decline on the stock market, after the price of oil dropped to its lowest point in nearly seven years.
At the close on Wall Street, the Dow Jones industrial average was down 117.1 points, about 0.7 percent, at 17,730.5. The Standard & Poor’s 500 index slipped 14.6 points, about 0.7 percent, to 2,077.1. The Nasdaq composite declined 40.5 points, about 0.8 percent, to 5,101.8.
CRUDE ENERGY: The price of the Jan. 16 contract for benchmark U.S. crude oil plunged $2.23, about 5.6 percent, to close at $37.74 a barrel on the New York Mercantile Exchange. That’s the lowest level since February 2009, at the height of the financial crisis.
Exxon Mobil and Chevron each fell 3 percent, the biggest declines in the Dow Jones industrial average.
Airline stocks rose on the prospect of lower fuel costs. Delta Air Lines and JetBlue Airways each rose 4 percent.
OPEC DECISION: Energy markets were roiled Friday after the Organization of Oil Exporting Countries, meeting in Vienna, Austria, announced the group would not curb production, estimated by The New York Times to be about 31 billion barrels a day. The glut of oil in world markets is causing the price to drop.
“What matters from here is whether there’ll be any meaningful production cuts in the U.S., which don’t seem to be coming,” said Doug King, chief investment officer in London for the Singapore-based Merchant Commodity Fund. As of Monday, the $220 million hedge fund was flat on the year after its bearish oil views helped it recoup a 10 percent loss through November.
“Price-wise, the market could be going for max pain after this,” King said. “The leader to the downside will be probably be WTI, because that’s where the production cuts have to come.” WTI, the West Texas Intermediate benchmark for U.S. crude dropped below $38 a barrel.
THE QUOTE: “No one in the energy patch is willing to support the price [of oil] and, if they aren’t willing, the price will keep dropping,” said Mizuho Securities chief economist Steven Ricchiuto. “The whole world is facing excess supply as the global economy slows.”