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Oil extends losses to near $105 as China economic slowdown weighs on outlook for demand

The price of a barrel of oil fell to near $105 on Thursday, extending a big drop the previous day sparked by weakness in China's economy.

Benchmark crude for September delivery was down 33 cents at $105.05 a barrel at midafternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract dropped $1.84, or 1.7 percent, to close at $105.39 on Wednesday.

Oil fell despite a fourth straight weekly decline in U.S. crude inventories. But even with a drop of nearly 30 million barrels over the past month, the U.S. oil supply is in the upper half of its average range for this time of year, suggesting demand is still tepid.

An HSBC survey released Wednesday showed China's manufacturing at an 11-month low this month, indicating a deepening slowdown in the world's second-largest economy.

China's slowdown is in large part self-induced. Its leaders are trying to shift the basis of China's growth away from reliance on exports and industrial investment in favor of consumption which they hope will be more self-sustaining. That means large stimulus to boost the economy is unlikely and Chinese demand for oil is unlikely to grow at its earlier blistering rates.

Brent crude, which is traded on the ICE exchange in London, was down 31 cents at $106.88 a barrel.

In other energy futures trading on Nymex:

— Wholesale gasoline shed 2.1 cents to $3.00 a gallon.

— Heating oil lost 2.7 cents to $3.023 a gallon.

— Natural gas rose 2 cents to $3.718 per 1,000 cubic feet.