Oil prices fell more than $3 toward $69 a barrel on Monday as a big drop in China's key stock index dented optimism about the pace of economic recovery and a potential recovery in global energy demand.

U.S. crude for October delivery fell $3.42 to $69.32 a barrel by 12:25 p.m. EDT, having fallen as low as $69.13 in intraday trade. In London, Brent crude lost $3.74 to $69.05 a barrel.

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 closed lower and U.S. stocks fell after China's index fall. <.EU>

The oil markets have been strongly affected by what's going on in China, where the fear is that authorities will rein in on lending and in the process curtail growth, said Phil Flynn, an analyst at PFGBest Research in Chicago

Jitters about the Chinese economy, the world's second largest oil consumer, also weighed on other Asian stock markets.

The Organization of the Petroleum Exporting Countries meets to review output on September 9 in Vienna. Several ministers and officials from the group have said it is likely to leave output targets unchanged.

Even though OPEC agreed to 4.2 million barrels per day of supply curbs late last year, and has kept output targets steady so far in 2009, actual production has been rising in recent months, according to industry surveys.

In a further sign of that trend, Abu Dhabi, the main producer in the United Arab Emirates, an OPEC member, will lift supply to Asia in October, the state oil firm said on Saturday.

Despite the indications of higher supply from some in OPEC, oil has rallied from a low of $32.40 in December, the weakest price in nearly five years, to a 2009 high of $75 a barrel last week.

(Additional reporting by Fayen Wong in Perth, Alex Lawler in London and Gene Ramos in New York; Editing by Walter Bagley)

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