Oil prices fell to their lowest levels in seven years, after OPEC officials failed to agree Friday on how to address the global supply glut.
By midday Monday, Brent crude futures fell 5 percent to $40.68 a barrel, the lowest price since 2009. The U.S. oil benchmark West Texas Intermediate crude dropped below $38 a barrel.
The decline sent energy stocks such as ExxonMobil, Chevron and Royal Dutch Shell tumbling, and helped drag the major stock indexes down sharply.
Oil prices have fallen more than 40 percent in the past year, as the industry confronts a worldwide oversupply problem. If Iranian sanctions are lifted, global production is expected to increase further.
OPEC officials held a seven-hour meeting Friday in Vienna to discuss whether to limit production, but the meeting turned rancorous and no agreement was reached.
"Any tiny risk that OPEC actually might do something during the next 6 months is completely off the table after Friday's meeting. With this risk out of the picture, the oil price declines further," said Bjarne Schieldrop, chief commodities analyst at SEB Markets, in a note quoted by The Wall Street Journal.
The falling oil prices are a boon for consumers, who are paying less for gasoline and heating oil, but it has been a brutal time for the energy business.
Sarah Emerson, managing director of consulting company ESAI Energy, told Bloomberg News, "We're in the midst of the worst." She went on to say:
"I think we'll be looking at a very different market in the next few months. Once there's more evidence that production is falling prices will start to recover."
But for now, a lot of investors are betting that prices will keep falling. The Financial Times reported that:
"Hedge funds are holding a near-record 'short' derivative positions equivalent to almost 360m barrels of crude that will benefit if prices fall.
"The bets come as many analysts see the oil glut extending well into 2016, as Opec members try to undermine higher-cost rivals. Output outside the cartel is expected to dip next year, but production from US shale, Canadian tar sands and other unconventional sources has proved more resilient than many expected."