Brent crude fell as much as $1.74 to $111.03 a barrel and was down 1.4 percent at $111.22 by 0638 GMT, while US crude slid $1.82 to $86.42. The dollar rose about 0.5 percent against a basket of currencies. Risk aversion erased about 3 percent of Brent's value in the previous two sessions on speculation Greece would default, while G7 finance ministers pledged a coordinated response on Friday to the global economic slowdown, but offered no specific steps and differed in emphasis on Europe's debt crisis. "People are quite nervous about Greece and other countries in the European area, so that is why investors are escaping to the dollar," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. "It's risk aversion." Greece on Sunday slapped a new tax on real estate to plug a 2011 budget hole, please international lenders and secure a key new loan tranche as concerns mounted in Europe over its euro zone membership. Vague pledges and a lack of action by Group of Seven industrialised nations underscored differences between Europe and the United States and a lack of room to manoeuvre in the face of the worst loss of confidence since the credit crisis. In other markets, Asian stocks fell and the euro weakened to six-month lows against the dollar after the resignation of a top German European Central Bank board member cast further doubt on Europe's ability to tackle the debt crisis. Fears about a Greek default rose after senior politicians in German Chancellor Angela Merkel's centre-right coalition started talking openly about it. CHINA SLOWDOWN Investors were also looking at data showing China's implied oil demand in August slipped to its lowest rate this year, as maintenance and accidents cut into refinery production. Fuel consumption in the world's No.2 user has been losing steam since May, with growth easing off the double-digits seen since last year because of higher crude costs that have squeezed refining margins and as Beijing's credit tightening moves cut into fuel spending. Chinese inflation is still too high and the country needs to maintain its prudent monetary policy, the central bank said on Monday. Still, on a year-on-year basis China's oil use expanded 7.8 percent, Reuters calculations based on preliminary government data showed on Saturday. "I don't really think that we should downgrade demand growth for oil, but of course the important thing is the sentiment for the market," Emori said. "Some money is going out of the commodities markets." Hedge funds and other large investors cut their futures and options net long positions on the New York Mercantile Exchange by 5,780 contracts to 155,837 in the week to Sept. 6, the US Commodity Futures Trading Commission said on Friday. HURRICANE PAUSE Concern about damage to US Gulf oil infrastructure eased after Tropical Storm Nate made landfall in central eastern Mexico over the weekend, with no other major weather disturbances expected to affect the hydrocarbon-rich region in the short term. Nate weakened to a tropical depression on Sunday as it moved further inland, after cutting Mexican oil production by 178,800 barrels a day as of Friday. The Dos Bocas port re-opened to shipping on Sunday, but the crude-exporting hub of Cayo Arcas remained closed along with two other smaller ports. Oil markets were also eyeing production and exports of Libyan crude following the country's power transition. About 2 million barrels of very light crude oil have been offered via a tender, making it the largest volume to come to market since war erupted in February. Libya has started producing oil again, the country's interim prime minister said on Sunday, promising that more of it would come online in the "near future".