Oil sinks 4 percent, hits 6-1/2 year low on China concerns

By Karolin Schaps

LONDON (Reuters) - Oil prices fell 4 percent to fresh 6-1/2 year lows on Monday, after Chinese stock markets suffered their biggest one-day drop since the global financial crisis, intensifying worries over the outlook for global oil demand.

Growing concerns of a China-led global economic slowdown sparked sharp declines in global equities and commodities, with around 400 billion euros wiped off Europe's FTSEurofirst 300 stocks index.

"Today's falls are not about oil market fundamentals. It's all about China," Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. "The fear is of a hard landing and that things get out of the control of the Chinese authorities."

Brent oil was trading down $1.95, or more than 4 percent, at $43.51 a barrel at 1200 GMT, after touching an intraday low of $43.28, its weakest since March 2009.

U.S. light crude was down $1.83, or 4.5 percent, at $38.62 a barrel, after falling as low as $38.59. Steep losses last week led to the contract's longest weekly losing streak since 1986.

U.S. crude is now more than 17 percent below its opening price at the start of the month and Brent is down more than 16 percent.

Multi-year lows in oil prices have so far failed to trigger any action from the world's biggest producers to rein in output, though Iran Oil Minister Bijan Zanganeh said on Sunday that holding an emergency OPEC meeting could be effective in stabilising prices, Iran's oil ministry news agency Shana reported.

There was a similar call by Algeria earlier this month, but other OPEC delegates said no meeting was planned.

Zanganeh also said Iran would defend its oil market share by ramping up production at any cost and as soon as possible.

"We will be raising our oil production at any cost and we have no other alternative," Zanganeh said. "If Iran's oil production hike is not done promptly, we will be losing our market share permanently."

In a sign that relations between Iran and Western powers are improving, Britain reopened its Tehran embassy on Sunday.

Several oil and gas companies, including representative from Shell, travelled to Iran with foreign minister Philip Hammond.

(Additional reporting by Meeyoung Cho in Seoul; Editing by Dale Hudson and David Holmes)