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Oil prices fell more than 3% on Tuesday after official data showed China's giant manufacturing sector, the engine powering the world's biggest energy consumer, contracted at the fastest pace in three years.
China's official Purchasing Managers' Index (PMI) fell to 49.7 in August from 50.0 in July, reinforcing concerns over the world's second-largest economy.
The figures helped spur a retreat in oil prices after three days of hefty gains. Investors took profits after Brent and US crude both soared more than 8% on Monday, traders said.
"It was primarily the China fear factor," Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum.
Benchmark Brent crude dropped $2.13 to a low of $52.02 a barrel, and was trading around $52.15 by 0815 GMT.
On Monday, Brent climbed $4.10, or 8.2%, extending a rally from a 6-1/2-year low at just above $42 on Aug. 26.
US crude was down $2.00 at $47.20 a barrel. It settled up $3.98, or 8.8%, in the previous session.
Oil prices rallied from their lowest levels since the global financial crisis after figures from the Energy Information Administration (EIA) pointed to lower-than-expected US oil production.
Revised EIA data published on Monday showed US domestic oil output peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months.
But, despite the lower US production, the global market is still heavily oversupplied with oil.
Oil producers in the Organization of the Petroleum Exporting Countries are pumping between 2 million and 3 million bpd more than required, forecasters say, and oil stockpiles are filling around the world.
Global demand is faltering in some regions.
Surveys show manufacturing struggling across Asia: an 11th successive contraction in Indonesia, a sixth contraction in South Korea and the weakest reading in nearly three years in Taiwan. Activity in India also slowed from July.
Investors will be watching key US data, including oil stocks, manufacturing and vehicle sales figures, later on Tuesday to give further direction to prices.
