U.S. crude oil futures fell to a six-month low on Monday as equity markets sold off on fears the economy might be teetering on the brink of a recession.

West Texas Intermediate is now up roughly 2% for the year while Brent is now down marginally for 2024, after trading higher for months on geopolitical risk in the Middle East and forecasts that the oil market would tighten in the third quarter.

U.S. crude oil closed below $73 per barrel, the lowest settlement since Feb. 5.

“In times of crises all assets correlate,” Matt Smith, lead oil analyst for the Americas at Kpler, said of oil following equity markets lower. But geopolitical tensions in the Middle East and OPEC’s ongoing production cuts are providing a floor for crude prices, Smith said.

Here are Monday’s closing energy prices:

• West Texas Intermediate September contract: $72.94 per barrel, down 58 cents, or 0.79%. Year to date, U.S. crude oil is up 1.8%.
• Brent October contract: $76.30 per barrel, down 51 cents, or 0.66%. Year to date, the global benchmark has fallen about 1%.
• RBOB Gasoline September contract: $2.33 per gallon, up more than 1 cent, or 0.69%. Year to date, gasoline is up 10.99%.
• Natural Gas September contract: $1.94 per thousand cubic feet, down more than 2 cents, or 1.27%. Year to date, gas is down 22.75%.

The sell-off comes after U.S. job growth disappointed in July, with the unemployment rate rising to 4.3%, the highest level since October 2021. The U.S. manufacturing sector also contracted in July for the fourth consecutive month.

The weak economic data in the U.S. comes as lackluster demand in China had already been spooking traders.

“Already before we had the jobs report, already before the manufacturing data, we were concerned about weaker imports into China, weaker refinery utilization rates in China,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said on CNBC’s “Squawk Box” on Monday.

OPEC plans face challenges

OPEC+ is also expected to start increasing production in October, though the group indicated last week that this decision “could be paused or reversed, depending on prevailing market conditions.” Croft said OPEC+ is now unlikely to start ramping up production.

“If the trend continues, I just can’t imagine OPEC would go forward with increasing output into this market. The question is, would they go the opposite way given the conditions we’re seeing,” Croft said, suggesting the oil producers could cut production again.

Bob Yawger, executive director of energy futures at Mizuho Securities, said OPEC+ seems interested in moving forward with the production increase based on last week’s statement, but they may not be able to afford to do so at this point. Rolling oil bank onto the market at current prices would “tank” the market, Yawger said.

Geopolitical risk

Geopolitical risk remains present with Israel preparing for an attack from Iran after the assassination of Hamas leader Ismail Haniyeh in Tehran last week.

“That exchange of fire in April between Iran and Israel was relatively contained, did not lead to any market disruptions,” Croft said. “But the question is now are we looking at something more coordinated with Hezbollah, Iran, Hamas.”

Bob McNally, president of Rapidan Energy, warned that tensions in the Middle East are “climbing the escalation ladder.” If Iran strikes Israel and kills civilians, the Netanyahu government will hit back much harder, he said.

“Israel is in a not in an eye for an eye mode,” McNally said. “They’re in three eyes for one eye mode.