Monday August 31, 02:50 PM

Oil drops below $72 as equities fall

LONDON (Reuters) - Oil fell to below $72 a barrel on Monday as a drop in China's key stock index and weaker European stocks stoked worries about the pace of economic recovery and a revival in energy demand.

China's key stock index dived 6.74 percent on Monday to a three-month closing low and recorded its second-biggest monthly loss in 15 years. European equities opened lower.

"I'm sure that weaker stock markets are feeding through into lower oil prices. It could indicate weaker demand from China," said Christopher Bellew, a broker at Bache Commodities in London.

U.S. crude for October fell $1.09 to $71.65 a barrel by 0843 GMT. London Brent crude fell $1.16 to $71.63.

"The sharp drop in Chinese markets is causing concerns and is inevitably making some investors rethink on the risks to China's economy and question their assumptions on the country's growth rate and energy consumption," said Daniel Liu, a commodities strategist at MG Global Singapore.

Jitters about the Chinese economy also weighed on other Asian stock markets.

Earlier in the session, oil rose on growing optimism about a global economic recovery, with positive data from Japan adding to the ebullience.

(For more news on Reuters Money click http://in.reuters.com/money)