Oil prices slip as China factory activity index tumbles

The fall signals weaker demand in the world's top energy consumer

Oil prices retreated in Asia today after a key measure of manufacturing in China fell to its lowest level in more than six years, signalling weaker demand in the world's top energy consumer.

The prospects of weaker demand come as the oversupplied global oil market is already troubled by expectations Iranian crude will return within months if it is found to have complied with a deal to curb its nuclear ambitions.

US benchmark West Texas Intermediate for November delivery, a new contract, fell 16 cents to $46.20 in late- morning trade. Brent crude for November declined 28 cents to $48.80.

"Crude oil prices were weighed by a double whammy of increasing prospects of the return of Iranian oil on the market, as well as potential fall in demand from China after the Chinese flash Purchasing Managers' Index (PMI) fell to a six-year low," said Bernard Aw, market strategist at IG Markets in Singapore.

The closely watched PMI for Chinese factory activity came in at 47 in September, down from August and the lowest since March 2009.

A result below 50 indicates the manufacturing sector is contracting, while anything above shows expansion.

Traders are also closely watching progress on Iran's compliance of a deal with world powers to curb its nuclear ambitions in return for the lifting of sanctions that will allow it to export more oil.

The market is also waiting for a report to be released later today on US commercial crude inventories -- a closely watched measure of demand in the world's biggest economy.