Oil fell for a fourth straight day on Thursday, shedding 1.7 percent toward $74, on signs that China's economic growth was slowing, raising concerns about energy demand.
The pace of manufacturing growth in the world's second largest oil consumer slowed in June as government steps to cool the property market and curb bank lending combined with a faltering global recovery.
The China data, and Moody's decision on Wednesday to put Spain's credit ratings under review, got broader markets off to a weak start for the new quarter, with Japanese stocks sliding to a seven-month low, China's to a 15-month trough and the dollar .DXY rising 0.2 percent against a basket of currencies.
Market confidence remains very fragile and people are concerned about the risks to the international economic recovery, said David Moore, an analyst at the Commonwealth Bank of Australia.
Most of the equity markets seem to be opening lower so that is probably not helping oil.
U.S. crude for August delivery fell $1.23 to $74.42 a barrel by 0740 GMT, extending the 10 percent slide of the second quarter, the first quarterly drop since 2008.
ICE Brent fell 1.43 on Thursday to $73.58.
China's official purchasing managers' index (PMI) fell to a weaker-than-expected 52.1 in June, the lowest since February, from 53.9 in May. Still, the indicator remained above the 50 threshold that indicates an expansion.
China is the top contributor to demand growth from emerging economies.
US SUPPLIES, JOBS REPORTS
Adding to negative sentiment on demand, U.S. fuel stockpiles posted surprise gains last week, government statistics showed on Wednesday, raising doubts about the speed of consumption recovery in the world's top consumer.
The nation's crude stockpiles fell 2 million barrels in the week to June 25, compared to expectations for a decline of 900,000 barrels. Cushing, Oklahoma, crude supplies shed 795,000 barrels to 36 million barrels.
The recent slip from record high storage at the Cushing hub has helped narrow the price spread between the front-month and near-month U.S. crude contracts. The spread narrowed to 55 cents on Thursday, from $1.27 on Wednesday.
Traders were also looking to the nation's weekly jobless claims later on Thursday and June's employment report on Friday for further indications about the direction of the economy.
The data in the next two days is particularly important and has the potential to move oil prices, Moore said.
Alex strengthened into a Category 2 hurricane in the Gulf of Mexico on Wednesday and was due to hit the Mexican coast in a few hours, but it stayed clear of oil fields, to the relief of crude markets.
The U.S. House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama.
(Editing by Clarence Fernandez)