By Jane Xie
SINGAPORE (Reuters) - Brent crude slumped to a more than two-year low under $97 per barrel on Monday as lacklustre economic data from China, the world's top energy consumer, cast a shadow on the outlook for oil demand amid abundant global supplies.
Analysts have warned of a potential hard landing at the world's No.2 economy after the country's factory output grew at its slowest pace in nearly six years last month, stoking fears of lower oil demand growth in the key consumer.
October Brent, which expires on Monday, fell to as low as $96.21 a barrel, the weakest since July 2, 2012. It recovered to $96.45 by 0635 GMT, down 66 cents. November Brent was down around 66 cents at $97.30.
U.S. crude fell $1.06 to $91.21 after earlier touching $90.63 - near a 16-month low of $90.43 hit last week.
"Obviously economic growth in China is one of the key drivers of world growth and generally of oil demand," Ric Spooner, chief market analyst of CMC Markets in Sydney said.
"As it currently stands, it seems likely that the (oil) demand growth won't keep up with the growth in supply capacity."
The Chinese data, which includes a drop in power generation for the first time in four years, came on the heels of downward revisions in 2014-2015 global oil demand growth estimate by the International Energy Agency last week.
On the supply front, Libya's oil production is expected to rise to 1 million barrels a day in October.
"When you look at the overall picture of OPEC, you do see supply coming back online from Libya," said Phin Ziebell, economist at the National Australia Bank in Melbourne.
"Ultimately Saudi Arabia is swing producer in OPEC and if we see a cut there, then we will see higher oil prices. Whether that transpires or not remains to be seen."
However, Gulf delegates attending a meeting of oil ministers from the region said the price drop was unlikely to spur action from the Organization of the Petroleum Exporting Countries (OPEC) unless crude fell below $85 a barrel.
A rally in the U.S. dollar against major currencies has also taken some shine off oil while investors will be closely watching the meeting of the Federal Open Market Committee later this week for clues on when the U.S will raise interest rates.
A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies.
GEOPOLITICAL TENSIONS EYED
Ample supplies and weak demand have hit oil prices in recent weeks, but investors continue to keep an eye on geopolitical tensions for indications of any new threat to supply.
"If we see anything that's a significant threat to Iraqi supply, or threat to the moving of oil and gas to Ukraine, then we could see a larger than normal upside reaction," Spooner said.
U.S and EU imposed fresh sanctions on Moscow last week, not only bringing an abrupt halt to exploration of Russia's huge Arctic and shale oil reserves but also setting rules on tougher financing of existing Russian projects.
Oil companies impacted include Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft.
Washington has also garnered support from several countries in the Gulf and Australia to build a coalition to counter Islamic State militants who have grabbed swathes of territories across Syria and Iraq.
(Editing by Florence Tan and Himani Sarkar)
