Oil slipped to a three-month low tonight as rising US crude inventories heightened concerns of a demand slowdown in the world's top consumer.
US light crude fell 59 cents to settle at $118.58 a barrel after hitting a low of $117.11, the lowest since early May and $30 off the record $147.27 a barrel struck on July 11. London Brent crude fell 92 cents to $116.78 a barrel.
The drop came after a weekly report from the US Energy Information Administration showed crude stocks in the world's biggest energy consumer rose by 1.7 million barrels in the week to August 1st, well above analysts' forecasts for a 300,000-barrel build.
Stocks of distillate fuels, including heating oil and diesel, rose by 2.8 million barrels, also above forecasts, while gasoline inventories fell by a steep 4.4 million barrels against forecasts of a 1.2 million barrel drop.
"The EIA data showing big increase in crude stocks are bearish, but the gasoline numbers showing a much larger than expected draw is certainly bullish," said Phil Flynn, analyst for Alaron Trading in Chicago.
US energy stockpiles have been climbing in recent weeks amid mounting evidence that surging pump prices and an economic slowdown are hitting fuel consumption.
Adding to weakness, Tropical Storm Edouard, the fifth named storm of the 2008 Atlantic hurricane season, hit the Texas coast without causing any major disruptions to US energy operations.
Oil companies were returning workers to offshore platforms in the Gulf of Mexico and resuming normal operations at refineries along the coast.
Crude's losses were tempered somewhat by news of an explosion on the Baku-Tbilisi-Ceyhan oil pipeline in eastern Turkey last night that halted oil flows along the key pipeline.
Nigerian supply concerns amid ongoing disruptions due to militant attacks and the threat of disruptions from Iran should its standoff with the West worsen have also been in focus, dealers said.