NEW YORK — The price of oil plunged again Monday and briefly fell below $50 a barrel for the first time since April 2009 as evidence mounted that the world will be oversupplied with crude this year.
The sharp drop prompted a big sell-off on Wall Street, not just in the energy sector, but across the entire stock market. The Dow Jones industrial average fell 331.34 points, or 1.9 percent, to 17,501.65. The S&P 500 index dropped 37.62 points, or 1.8 percent, to 2,020.58. The Nasdaq composite fell 74.24 points, or 1.6 percent.
Energy stocks led the drop, plunging 4 percent. But the declines were broad, and even airline stocks, usually a beneficiary of lower fuel prices, ended the day lower.
On Monday, Citigroup cut its forecast for 2015 global oil prices as a result of high supplies. Citigroup analyst Ed Morse wrote in the report that the first half of this year will bring “a step-up in oversupply, more volatility, and turmoil.”
Stocks already had endured a weak open Monday amid concerns that Greece could exit the euro, adding to worries about the poor outlook for growth in that region. As oil continued to slide, the losses deepened and the Standard & Poor’s 500 index ended the day with its biggest loss in three months.
Benchmark U.S. oil dipped to $49.77 before closing down $2.65, or 5 percent, to $50.04 a barrel. Brent crude, a global benchmark used to price oil used by many U.S. refineries, sank $3.31, or 5.9 percent, to $53.11.
In June, oil traded above $107 a barrel. But rising production outside of the OPEC oil cartel, especially in the U.S., boosted supplies just as weakness in the global economy slowed the growth in oil demand. The 12-member Organization of Petroleum Exporting Countries’ decision in November to maintain existing production levels accelerated the rout in oil prices.
Slower growth in China’s economy, a driver of oil demand in recent years, and a strong dollar, which makes oil more expensive for holders of foreign currencies also have pressured oil prices.
Citigroup’s Morse reduced his forecast for global crude to an average of $63 a barrel for 2015, down from $80 a barrel.
Drillers around the world already have begun to trim exploration budgets and delay new projects as a result of low prices, but production from existing fields will continue and keep supplies high.
The last time U.S. oil traded below $50 was April 29, 2009.
The low oil prices have led to sharply lower fuel prices for shippers, airlines and drivers. Morse equated the drop in global oil prices to a $1.6 trillion stimulus package for the world economy.
On Monday, the U.S. national average price of gasoline fell to $2.20 per gallon. That’s $1.12 cheaper than last year at this time and the lowest since May 2009. The Energy Department estimates the drop in gasoline prices will save U.S. households $550 this year.