Oil drops to $32 under fears about China’s economy

China accelerated the devaluation of the yuan on Thursday, sending currencies across the region reeling and domestic stock markets tumbling, as investors feared the Asian giant was kicking off a virtual trade war against its competitors.

The benchmark Shanghai Composite Index declined by 7.32 percent, which led to a halt in trading, as the circuit breaker mechanism was triggered.

“It is extremely hard to forecast the exact bottom”, Hans van Cleef, senior energy economist at ABN Amro, told the Reuters Global Oil Forum.

New York’s West Texas Intermediate for February delivery hit United States dollars 32.10 a barrel in early morning deals, striking the weakest level since late December 2003.

Oil prices continue moving towards the $30 per barrel mark, prompting some investors to question if the commodity can rebound from those levels. OPEC’s biggest producer, Saudi Arabia, has promoted the group’s strategy of letting global prices fall in order to push rival U.S. shale oil producers out of the market.

“There may be a short-term case for a technical price recovery, but the fundamentals remain firmly bearish as confirmed most recently by the net build in U.S. overall petroleum inventories for the week ended Jan 1”, said Tim Evans of Citi Futures.

As if the Caixin data wasn’t enough, Thursday’s weakness in the offshore renminbi added to worries regarding China’s economic strength and the crude oil that it would demand in the future.

Prices extended losses as much as 3.5 percent in NY.

He believes, that on this basis alone, global oil prices could still fall further in the coming weeks. The crash raises the risk of slowing demand from the world’s No. 2 oil consumer threatening to prolong an over year-long supply overhang.

The price of oil has shed around 70 percent since the current downturn began in June 2014, causing pain to oil companies and governments that rely heavily on crude revenues.

In the U.S., imports of crude oil fell to their lowest level since 1995 in October 2015.

However, oil’s rapid fall has made a prediction that Goldman Sachs made previous year that crude could fall as low as $20 a barrel seem less outlandish than it then seemed.

The US Department of Energy’s weekly report on Wednesday showed a sharp drop in US commercial crude inventories, by 5.1 million barrels to 482.3 million barrels in the week ending January 1. “There’s no other input that can really reverse the trend right now in crude oil”.