Oil's drop holds economic benefits, including lower costs for some companies and cheaper fuel prices for consumers. But investors were already bracing for a significant drop in US profit growth next year, and the oil price slump is poised to bite into profits for energy producers and related companies that are part of Wall Street's benchmark S&P 500 stock index.
OPEC and allied producers used output cuts to curb an oil glut that sent prices from late 2014 into a prolonged slump, bringing prices to below $30 a barrel at the start of 2016. But supplies are growing again, and the US-China trade war and other factors have investors worried that slowing economic growth could erase demand and send prices still lower.
"What started the sell-off on oil was a supply issue," said Alicia Levine, chief market strategist at BNY Mellon Investment Management. "In the last couple of weeks, what we are getting is fears of slowing demand. And fears of slowing demand are directly related to fears of global growth slowdown."
Crude oil prices have fallen 30 percent or more 13 times since 1982, according to Ed Clissold, chief US strategist at Ned Davis Research. Of the prior 12 occurrences, the oil drop overlapped eight times with what Ned Davis Research defines as a cyclical bear market - a 30 percent drop in the Dow Jones Industrial Average after 50 calendar days or a 13 percent decline after 145 calendar days.
However, finds Clissold, in only three of those cases did the oil decline overlap with a US economic recession.
Futures contracts for US crude, known as West Texas Intermediate (WTI), topped $75 a barrel in early October. The commodity slid to as low as $49.41 last week, and was trading just above $50 on Thursday. Brent, the global crude benchmark, has notched a similar percentage drop.