Brent crude tumbles below $40 in wake of faltering demand outlook

Crude in London tumbled below $40 a barrel for the first time since late June in the wake of faltering demand and weaker equities dampening market sentiment.

Brent futures declined more than 6% on Tuesday to the lowest level in nearly three months. A stall in Asia’s recovery, the end of the US summer driving season and increased supply from the OPEC+ alliance signal a bleak short-term outlook for oil prices. Equity markets also weakened, leading crude to break below the key psychological barrier of $40 a barrel.

“The lack of fiscal support is starting to spook the markets a little bit,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “It’s showing up in oil with fears that you’re going to reduce demand coupled with stories circulating that OPEC’s discipline is less than ideal.”