* U.S. crude ends below $42, within range of 6-1/2-year low
* Japan economy shrank in Q2
* China slowdown adds downward pressure
* U.S. oil rigs on the rise again, adding to market woes
(Adds market settlements, view on Cushing/Gulf Coast oil
storage)
By Barani Krishnan
NEW YORK, Aug 17 (Reuters) - Oil fell about 1 percent on
Monday, with U.S. crude settling within range of a new
6-1/2-year low, after No. 3 oil consumer Japan said its economy
contracted in the second quarter and China's slowdown continued
to weigh on sentiment.
A stronger dollar .DXY , after a report that U.S.
industrial output grew at the fastest pace in eight months, also
made greenback-denominated commodities, including crude, less
affordable for holders of the euro and other currencies. USD/
ID:nL1N10P0Q2
U.S. light crude CLc1 settled down 63 cents, or 1.5
percent, at $41.87 a barrel. Monday's intraday low of $41.64
came within striking distance of Friday's low of $41.35, the
weakest front-month price since March 2009. Trading in expiring
options for U.S. crude dominated the action.
Brent LCOc1 , the global crude benchmark, settled down 45
cents, or nearly 1 percent, at $48.74 a barrel. It earlier hit a
session low of $48.35, about $3 above its six-year low of $45.19
set in January.
Japan's economy shrank at an annualized pace of 1.6 percent
in the second quarter. China fixed its exchange rate slightly
higher for the second day running, after a surprise devaluation
last week sliced 3 percent off the yuan. ID:nL3N10R0KA
ID:nL3N10S1EH
"The general talk in the market is about the continued
ripple effect from the Chinese devaluation," said David Thompson
at Washington-based energy-specialized commodities broker
Powerhouse.
Oil has lost about a third of its value since June.
U.S. crude itself has fallen for seven weeks in a row, after
another rise last week in U.S. oil rig additions that hinted at
growing production.
Demand for U.S. crude and Brent is likely to fall further in
the next few weeks as U.S. and European refineries start
maintenance for autumn, traders said. ID:nL5N10N3UK
Some say the slowdown in refining raises the specter of oil
supplies reaching capacity over the next few months at the
Cushing, Oklahoma delivery point for U.S. crude and elsewhere on
the U.S. Gulf Coast.
Others dispute this.
"I really don't see the Cushing or Gulf Coast storage
tank-topping scenario in 2015 but more of a possibility in
first-quarter 2016," said Scott Shelton, commodities specialist
at ICAP (LONDON:IAP) in Durham, North Carolina.
Money managers and hedge funds have cut their combined net
long positions in U.S. crude to 2010 lows and in Brent to
December 2014 lows, on an apparent building consensus that oil
prices will likely remain low for a while, data
shows. ID:nEONF8B0RU ID:nEMN2CHXOF