Brent crude slipped below $107 a barrel on Thursday after weak China economic data further toned down the fuel demand outlook in the world's second largest oil consumer, while its spread with US crude widened as investors took profit.

Oil fell for a second day after preliminary economic data showed China's manufacturing activity hit an 11-month low in July and its job market weakened, raising concerns of slower oil demand growth. Confirmation of a fall in US oil inventories failed to support prices.

Brent crude for September fell 29 cents to $106.90 a barrel by 0359 GMT, after settling on Wednesday at its lowest since July 4. US crude dropped 51 cents to $104.88, after earlier slipping to $104.72, its lowest in 10 days.

"There is no supply shortage and it will take time for the global economy to recover," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

China's economic growth is going stabilise at lower levels, and it will no longer be a "giant oil demand driver," he said.

Investors had sold West Texas Intermediate (WTI) crude futures to book profits after Brent's spread to US crude touched parity on Friday. The spread widened to around $2 on Thursday after settling at $1.80 in the previous session.

Investors had poured money into WTI in the past month as they expected new US pipeline capacity to alleviate a Midwest supply glut by moving it to the Gulf Coast from Cushing, Oklahoma, the delivery point for the US crude contract.

"After the spread hit parity, there's no reason for WTI to be much stronger," Hasegawa said, adding that technical charts showed that the contract had been overbought.

The recent strength in WTI prices could also curb demand for domestic crude in the US east coast as refiners turned to cheaper seaborne Brent-linked grades, he said.

US crude oil stockpiles declined last week for the fourth straight week, Energy Information Administration (EIA) data showed on Wednesday, while both gasoline and middle distillate stocks surprised with falls against expectations for gains.

US crude inventories fell by just under 30 million barrels over the four weeks to July 19, the biggest four-week decline on records dating back to 1982. - Reuters