Crude oil prices closed Monday at $38.24 a barrel, a drop of 6 percent on the day and a fall from $95.39 a barrel a year ago. (Karen Bleier/AFP/Getty Images)

For years, almost every barrel of new oil production around the world — from southern Iraq to Canada’s tar sands and U.S. shale oil wells in Texas or North Dakota — has been soaked up by China, either directly or indirectly.

Now, however, the prospect of an economic slowdown in China has pummeled international oil prices that were already being driven down by Saudi Arabia’s relentlessly high production, new Iraqi output and stubbornly prolific pumping by U.S. independent producers. Soon, assuming the nuclear deal with Tehran takes effect, Iran may boost its exports, too.

The result: Crude oil prices closed Monday at just $38.24 a barrel, a precipitous fall from $95.39 a barrel just a year ago and down nearly 6 percent on the day. The price of oil stands at a 6 1/2 -year low, the same level it reached in the darkest days of the financial crisis of 2008-2009.

China’s demand weakness just exacerbates tidal oversupply created by [U.S.] shale’s refusal to swing so far and Saudi/Iraqi production ramp ups,” Robert McNally, president of the Rapidan Group consulting firm and former member of the National Security Council, said in an e-mail. “China’s weakness doesn’t so much add to global supplies as fail to soak up an inundation of oversupply.”

Ever since it zipped past the United States in 2013 to become the world’s biggest net importer of petroleum, China has been a giant sponge for rising global oil output. In 2013, it accounted for 43 percent of the increase in global oil consumption. In 2014, it imported a net of 6.1 million barrels a day, 1 million barrels a day more than the United States. In May, the federal Energy Information Administration was still expecting China to account for a quarter of rising global demand.

The Shanghai Composite Index ended trade on Monday down 8.49 percent, after all of the yearly gains were wiped out of the market.The fall comes as investors were disappointed that policymakers announced no support for the markets over the weekend. (Reuters)

Suddenly, those numbers are looking mushier. And given that oil is a commodity whose price is determined by small amounts of shortfalls or excesses in production, a slowdown in China would drive down oil prices. On Aug. 19, the EIA slashed its crude oil price forecast for this year and next by more than 10 percent.

For consumers, low oil prices are, ultimately, good news, similar to a tax cut. And since the United States remains a major net importer of crude oil, lower prices help the nation’s trade balance and stem some of the flow of money to oil exporting countries, most notably Canada (the leading supplier to the United States) as well as producers in the Middle East and West Africa. China’s oil import bill will be lower, too.

The other side of the coin is production.

The Organization of the Petroleum Exporting Countries was designed to constrain output and artificially drive up prices, but its members have frequently bickered over who should cut and by how much. Now, OPEC members seem more worried about market share than cutting output. And Saudi Arabia, the cartel’s swing producer, has kept production high as prices have tumbled.

“Saudi Arabia may at some point cut production. But there is no sign such a turnabout is approaching,” McNally wrote to clients last week. “Riyadh possesses a massive $674 billion foreign exchange war chest and has plenty of room to increase borrowing with government debt at 1.6% of GDP in 2014.”

The kingdom has let prices plummet without support for about a year, openly saying it hoped to put a dent in expansion plans by rival oil exporters. Many of those rivals took a hit Monday on stock markets; one of the biggest U.S. producers of shale oil, Continental Resources, tumbled 25 percent before closing down 9.5 percent.

Yet Iran’s oil minister, Bijan Namdar Zanganeh, pledged to boost output “at any cost,” according to the ministry’s news Web site. And the number of active oil rigs in the United States, which fell by half over the past year, rose for the seventh time in eight weeks, according to industry data Friday.

That’s why China’s apparent slowdown is the focus of so much attention — for other commodities as well as crude oil.

But China’s oil consumption figures aren’t exact, and that has added to the uncertainty in markets recently. China’s strategic petroleum reserves are growing, and the government hasn’t clearly indicated by how much. That has disguised some of the weakness in demand from China’s own flagging economy, many analysts say.

Other world reserves are growing, too. The EIA said Monday that “inventories are estimated to have grown by 2.3 million barrels per day through the first seven months of 2015, the highest level of inventory builds through July of any year since 1998.” That’s a lot of extra oil sloshing around world markets.

Citigroup’s head of global commodities research, Edward Morse, issued a note to clients recently saying that oil prices were “breaking to the downside” and that “there may be more downward pressure ahead.”

“There is a three-way game of chicken playing out between OPEC, shale, and ‘non-OPEC non-shale,’ with no one blinking yet,” he said.