Oil falls below $110 on global growth worries

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Crude oil slipped to a six-week low below $110 per barrel on Friday, weighed down by growth worries as political gridlock brought the prospect of massive U.S. government spending cuts and on disappointing European industrial data.

The world's biggest economy hurtled towards automatic spending cuts of $85 billion that start on Friday as the White House and the Republicans failed to agree on an alternative deficit-reduction plan.

The International Monetary Fund (IMF) has warned the cuts could knock at least 0.5 percentage point off U.S. economic growth this year and slow the global economy.

In China, domestic and foreign demand slackened as the official Purchasing Managers' Index (PMI) missed expectations easing to 50.1, its lowest reading since September 2012, the government said on Friday.

And in Europe, surveys showed British manufacturing shrank unexpectedly in February, while France's factories suffered their 12th consecutive monthly fall in output and industrial activity in Spain and Italy deteriorated again.

Brent crude for April delivery fell $1.56 to a low of $109.82 per barrel, its weakest since mid-January, before recovering slightly to around $110.10 by 1445 GMT. For the week, the contract is down more than 3 percent, its third consecutive weekly loss.

U.S. oil fell to a low of $90.44, down $1.61. The contract has lost more than 2.5 percent for the week.

"It is extremely polarised in U.S. politics at the moment so I wouldn't be too optimistic that there would be a quick solution," said Filip Petersson, commodity strategist at SEB in Sweden.

Chinese data showing factory growth cooled in February also dampened the mood on commodity markets.

Analysts said oil was vulnerable to more falls as the market prices in the political stalemate in the United States.

The sharp downturn in prices could encourage investors to sell long positions in crude oil, analysts said, awaiting official U.S. exchange data due to be published later on Friday.

"The technical breakdown across the oil spectrum strongly suggests a continuation of the long liquidation process that has been developing during the past couple of weeks," Jefferies Bache analysts said.

"While today's COT (commitment of traders) report will likely show another significant reduction in net speculative length in both crude and RBOB, we feel that long to short ratios within the open interest will remain tilted bearish." (Additional reporting by Luke Pachymuthu in Singapore; Editing by Christopher Johnson and Jason Neely)



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