Brent Oil Hits 26-month Low Under US$97

 Brent crude oil on Monday slumped to its lowest in over two years, below $97 per barrel as lacklustre economic data from China, the world's top energy consumer, cast a shadow over the outlook for oil demand at a time of abundant supply.

* China Aug factory output growth slows to near 6-year low
* Investors eye stronger dollar ahead of Fed meeting
* U.S. and EU impose fresh sanctions on Russia over Ukraine

China's factory output grew at the weakest pace in nearly six years in August, while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown.

October Brent, which was due to expire later on Monday, fell to as low as $96.21 a barrel, its weakest since July 2, 2012. The futures contract recovered to around $96.40 by 0730 GMT, down 71 cents.

U.S. crude was down $1.00 at $91.27, after touching $90.63 - near a 16-month low of $90.43 hit last week.

"Economic growth in China is one of the key drivers of world growth and generally of oil demand," said Ric Spooner, chief market analyst at CMC Markets. "It seems likely that (oil) demand growth won't keep up with the growth in supply capacity."

The Chinese data, which showed a drop in power generation for the first time in four years, came on the heels of downward revisions in 2014 and 2015 global oil demand growth estimates by the International Energy Agency last week.

On the supply front, Libya's oil production is expected to rise to 1 million barrels a day in October.
Oil ministers from the Middle East Gulf said last week the oil price drop was unlikely to spur action by the Organization of the Petroleum Exporting Countries (OPEC) unless crude fell below $85 a barrel.

A rally in the U.S. dollar against major currencies has also helped weaken oil, while investors will be closely watching the meeting of the Federal Open Market Committee later this week for clues on when the United States will raise interest rates.

A stronger U.S. currency makes dollar-denominated oil more expensive for holders of other currencies.

Ample supplies and weak demand have hit oil prices in recent weeks, but investors continue to keep an eye on geopolitical tensions for indications of any new threat to supply.

"If we see anything that's a significant threat to Iraqi supply, or a threat to the moving of oil and gas to Ukraine, then we could see a larger-than-normal upside reaction," Spooner said.

The United States and European Union imposed fresh sanctions on Moscow last week, hampering exploration of Russia's huge Arctic and shale oil reserves and setting rules on tougher financing of existing Russian projects.

Oil companies hit include Gazprom, Gazprom Neft , Lukoil, Surgutneftegas and Rosneft.

By Christopher Johnson