Brent crude oil hit an 18-month low of $91 per barrel on Thursday as the outlook for economic growth darkened, pointing to lower-than-expected energy consumption worldwide.
China's factory sector shrank for an eighth straight month in June as export order sentiment hit its weakest since early 2009, according to a survey indicating the country's economic trough may extend well into the third quarter.
The U.S. Federal Reserve on Wednesday signalled a weaker outlook and disappointed some investors who had hoped for aggressive steps to boost the world's top economy.
U.S. jobs data on Thursday compounded the gloom with news that the number of Americans filing new jobless claims for was little changed last week, suggesting the labor market was struggling to regain momentum.
Demand also looked shaky in the euro zone where borrowing costs have risen and the health of the banks has worsened.
"The U.S. economy is not in good shape," said Ken Hasegawa, commodity sales manager at Newedge. "You add Europe and a poor demand-supply situation, and the picture gets much worse. I can't see any support for crude prices now. It's all very bearish."
Brent crude oil futures for August fell $1.69 to a low of $91.00 per barrel, their weakest since December 2010, before recovering to trade around $92 by 1240 GMT.
Front-month U.S. crude was down 75 cents at $80.70 per barrel, after earlier hitting an eight-month low of $79.92.
"It is a toxic combination of negative factors," said Eugen Weinberg, head of commodities research at Commerzbank.
"Disappointment over the economic situation, the euro zone crisis, high risk aversion and strong downward momentum all mean investors are staying away from oil."
Contango curve
On top of the negative macro-economic news, oil was also hit by news on Wednesday of an unexpected rise in U.S. crude inventories, which increased 2.86 million barrels, defying forecasts for a 1.1 million barrel decline, according to data from the U.S. Energy Information Administration.
Brent has so far fallen 10 percent this month and is now down almost 15 percent in 2012, despite a strong rally through the first two months of the year. It has slipped almost 30 percent from this year's peak above $128 in March.
Nearby Brent prices have fallen below forward futures for the first time in almost a year, pushing the front of the price curve into contango, a structure that is commonly associated with a weak and over-supplied market.
Three years ago the Brent contango widened to the point where oil companies and trading houses could make money by buying crude oil, storing it at sea and then selling later.
"If the Brent contango widens a bit further then we will have to worry about the return of floating storage options for Brent-related crude oils," said Olivier Jakob, a Swiss-based energy market analyst at Zug consultancy Petromatrix. (Editing by William Hardy)
