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, 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.
U.S. light crude 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, 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.
"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.
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