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Activity in China's factory sector shrank at its fastest pace in
almost 6-1/2 years in August as domestic and export demand
dwindled, adding to worries about lower consumption of crude in
the second-biggest oil user.
Asian stocks followed Wall Street lower as fears took hold of a
China-led slowdown in global growth.
Both global oil benchmarks are near 6-1/2-year lows, with U.S.
crude heading for its longest weekly losing streak in 29 years.
"The market is stuck in a relentless downtrend," said Robin
Bieber, a director at London brokerage PVM Oil Associates.
"The trend is down - stick with it."
In late 1985, oil prices slumped to $10 from around $30 over
five months as OPEC raised output to regain market share
following an increase in non-OPEC production.
U.S. crude for October delivery <CLc1> was 25 cents lower at
$41.07 a barrel by 1005 GMT. On Thursday, the September U.S.
crude contract <CLU5> saw its lowest intraday trade since March
2009 at $40.21 a barrel before it expired at the market close.
Brent oil <LCOc1> was on track for its seventh weekly decline in
eight, down 30 cents at $46.32 a barrel, after settling 54 cents
lower on Thursday.
"Weighing on prices is the continued ample supply with crude oil
builds in the U.S. and OPEC pumping at record levels," said
Michael Poulsen at Global Risk Management. "Fear of slowing
growth in China is increasing."
The dollar <.DXY> fell on receding expectations of a U.S.
interest rate rise in September, providing some support for oil.
But technical charts for almost all the big oil futures markets
looked bearish, PVM's Bieber said.
U.S. crude inventories continued to rise last week, as imports
rose and shale production fell more slowly than anticipated,
despite dropping prices.
"The only silver lining we are seeing coming from the United
States is that refining rates remain high and that crude
production continues to fall," Daniel Ang at Singapore-based
Philip Futures said.
(Additional reporting By Jacob Gronholt-Pedersen in Singapore;
Editing by Dale Hudson)
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