US oil prices plunge, WTI sheds 7.7%

US oil prices plunged Tuesday as poor manufacturing data in China, the world's largest energy consumer, hammered the outlook for demand and shook market confidence.

US benchmark West Texas Intermediate for October delivery lost $3.79, or 7.7 percent, closing at $45.41 a barrel on the New York Mercantile Exchange.

The sell-off snapped a strong three-day WTI rally that had pushed the futures contract up more than 27 percent, rebounding from six and a half year lows.

China's key manufacturing sector shrank in August, according to official data released earlier in the day. The purchasing managers index slumped to a three-year low of 49.7 in August from 50.0 in July. A reading below 50 indicates contraction.

US financial giant Citigroup said that China was driving prices of commodities, including oil, lower "as never before."

"We expect China to continue to exert downward pressure on commodity prices in the coming months," it said.