Crude oil drops to 3-week low on China growth concerns, Fed outlook

Crude oil futures fell to hit a three-week low on Monday, as a combination of concerns over a deepening slowdown in China and fears over an end to the Federal Reserve’s asset purchase program weighed. 

On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD93.30 a barrel during European morning trade, down 0.4% on the day.

New York-traded oil prices fell by as much as 1% earlier in the day to hit a session low of USD92.74 a barrel, the weakest level since June 4.

Wall Street lender Goldman Sachs slashed its estimate for China’s gross domestic product in 2013 to 7.4% from 7.8%, citing weaker economic indicators and tightening of financial conditions

Meanwhile, fears over a cash crunch in the Chinese financial system lingered after interbank lending rates surged to a record last week.

China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.

Oil prices also struggled due to a broadly stronger U.S. dollar, as dollar-priced commodities become more expensive to investors holding other currencies when the greenback gains.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.2% to trade at 82.80, the strongest level since June 4.

Demand for the dollar continued to be underpinned after Fed Chair Ben Bernanke said last Wednesday that the central bank could begin slowing asset purchases by the end of 2013 and wind them down completely by the middle of 2014 if the economy picks up as the central bank expects.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery fell 0.5% to trade at USD100.40 a barrel, with the spread between the Brent and crude contracts standing at USD7.10 a barrel.

London-traded Brent futures fell to a session low of USD99.83 a barrel earlier in the day, the weakest level since June 3.