By Robert Gibbons
NEW YORK (Reuters) - Crude oil futures fell sharply to fresh 6-1/2-year lows on Monday, then pared losses in volatile trading as a dive in Chinese equities sparked more fears of drastically curbed oil consumption even as a supply glut pressures prices.
A near 9-percent tumble in China shares roiled global markets and sent the Dow Jones Industrial Average down more than 1,000 points in early trading, before Wall Street pared losses.
"China's drop pushed everything lower and now we'll see if the bounce by U.S. stocks after the early pull back can stop the slide," said Phil Flynn, analyst at Price Futures Group in Chicago.
Brent October crude was down $2.33 at $43.13 a barrel at 11:37 a.m. EDT (1537 GMT), after plunging to a contract low of $42.51, off 6.5 percent from Friday and the lowest front-month price since March 2009.
Off 16 percent in August, Brent is heading for a fourth straight monthly loss.
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U.S. October crude was down $1.94 at $38.51, after falling to $37.75, off 6.7 percent from Friday and weakest front-month price since February 2009.
U.S. crude is on pace for a 17 percent monthly loss posted its eighth consecutive weekly loss on Friday, the longest weekly losing streak since 1986.
"Today's falls are not about oil market fundamentals. It's all about China," Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. "The fear is of a hard landing and that things get out of the control of the Chinese authorities."
The Thomson Reuters CoreCommodity CRB Index, which tracks 19 commodities, was off 2.4 percent.
Crude's multi-year price lows have so far failed to trigger a production cut by top producers, though Iranian Oil Minister Bijan Zanganeh on Sunday endorsed holding an emergency OPEC meeting and said it could be effective in stabilizing prices.
Algeria made a similar call earlier this month, but other OPEC delegates said no meeting was planned.
Zanganeh also said Iran would defend its oil market share with increased production.
"We will be raising our oil production at any cost and we have no other alternative," Zanganeh said. "If Iran's oil production hike is not done promptly, we will be losing our market share permanently."
Money managers increased their bets on a rebound in Brent prices, according to data from the InterContinental Exchange showing increased net long positions after four weeks of net sales.
(Additional reporting by Karolin Schaps in London and Meeyoung Cho in Seoul; Editing by Dale Hudson, David Holmes and W Simon)