TOKYOSINGAPORE, Sept 8 Reuters Oil extended losses on Friday, further receding from this week39;s 10month highs, as fears about the health of China39;s slowing economy and a stronger U.S. dollar wiped out the gains triggered by supply cuts from major producers Saudi Arabia and Russia.

Brent crude futures dropped 41 cents, or 0.5, to 89.51 a barrel by 0619 GMT, while U.S. West Texas Intermediate crude WTI futures declined 50 cents, or 0.6, to 86.36.

Both benchmarks reached 10month highs earlier this week on concerns about potential shortages during the peak winter demand season after Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year.

Despite these bullish signals, China39;s bumpy recovery, and the strong U.S. dollar, are weighing on prices, said Priyanka Sachdeva, senior market analyst from Phillip Nova.

Investors expect U.S. interest rates to linger at 20year highs, and that has unleashed the dollar, making it more expensive to buy crude in other currencies.

The U.S. dollar index was just off a sixmonth peak on Friday.

Investors took profits after the recent rally which was driven by concerns over tighter supply following extended production cuts in Saudi Arabia and Russia, said Tatsufumi Okoshi, senior economist at Nomura Securities.

The market has factored in the news of lower supply and it would need clear signs of stronger global demand, especially in China, to move higher, he said, noting investors39; consensus is that…