The Associated Press
Oil fell below $70 a barrel Monday as a steep drop in China's stock market raised doubts about the strength of the U.S. and global economic recovery.
Benchmark crude for October delivery lost $3.18 at $69.56 a barrel on the New York Mercantile Exchange. The contract on Friday added 25 cents to settle at $72.74, after falling from near $75 earlier in the week.
China raised some red flags last week as government officials seemed to suggest they would cut back on bank lending in coming months, essentially removing one of the stimuli they have added to the Chinese economy, said PFGBest analyst Phil Flynn.
The Shanghai Composite Index plunged 6.7 percent on Monday, adding to a nearly 3 percent drop on Friday, on concerns of a tightening in bank lending.
"The market is concerned whether or not the Chinese government can engineer a soft landing," Flynn wrote in his morning report. "How will the futures markets react as they start to remove this historic stimulus?"
Major refiner China Petroleum&Chemical Corp. fell by the daily maximum 10 percent after the company said it does not expect to significantly boost production, while PetroChina, the Shanghai index's heaviest weighted share, fell 6.7 percent.
Oil has traded near $70 a barrel for most of the last few months as investors struggle to gauge how robust the U.S. recovery will be.
Crude has tried and failed several times to break through the $75 level, but key fundamentals remain bearish.
The U.S. Energy Department last week said that U.S. crude stockpiles rose by 200,000 barrels for the week ended Aug. 21. The previous report showed a large and unexpected draw on oil, which sent prices soaring.
Ahead of an OPEC meeting in Vienna next month, oil ministers from thegroup have indicated they will not push for output cuts - a sentiment reinforced by a weekend decision of the United Arab Emirates' main oil exporter to sell more crude and ease up on OPEC-led supply curbs.
Meanwhile, the average price for a gallon of regular gasoline rose a tenth of a cent overnight to $2.61, according to auto club AAA, Wright Express and Oil Price Information Service. That's about 8 cents more than a month ago, but $1.08 less than at this time last year.
In other Nymex trading, gasoline for September delivery was down 8.93 cents at $1.9725 a gallon and heating oil plunged by 9.53 cents to $1.7650 a gallon. Natural gas shed 5.2 cents to $2.981 per 1,000 cubic feet.
In London, Brent crude was down $3.45 at $69.34.
Associated Press Writers Alex Kennedy in Singapore, George Jahn in Vienna and Elaine Kurtenbach in Shanghai contributed to this report.