Oil falls to 3-month low on US crude build

LONDON - Oil fell to a new three-month low near $117 a barrel on Wednesday after government data showed bigger-than-expected increases in crude and distillate stocks in the United States last week, the world's top oil consumer.

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Published: Wed 6 Aug 2008, 10:22 PM

Last updated: Sun 5 Apr 2015, 11:50 AM

U.S. light crude was $1.69 down at $117.48 a barrel by 1538 GMT, off highs of $120.49 hit earlier in the session.

London Brent crude was down $1.66 at $116.04 a barrel.

The U.S. Energy Information Adminsitration (EIA) said crude oil stocks in the world's biggest energy user rose by 1.7 million barrels last week, against expectations of an increase of 300,000 barrels.

Gasoline inventories fell by 4.4 million barrels compared with forecasts of a 1.2 million barrels drop, while stocks of distillate fuels, which include heating oil and diesel, rose by 2.8 million barrels, 700,000 barrels more than expected.

"It's mixed data -- it's bearish for distillates, bearish for crude oil and bullish for gasoline. One key question is how much we're going to make out of the draw in gasoline when we only have one month left in the driving season," said Tim Evans, energy analyst at Citi Futures Perspective.

Oil earlier bounced off near three-month lows after an explosion on the Baku-Tbilisi-Ceyhan oil pipeline in eastern Turkey late on Tuesday halted oil flows along the key pipeline, providing a bullish backdrop.

It added to Nigerian supply concerns and the threat of disruptions from Iran should its standoff with the West worsen.

Oil has fallen almost $30 from its mid-July peak of $147.27 a barrel -- a drop of nearly 20 percent -- amid growing evidence that high prices have finally started to take a toll on demand.

"The next support area is $117. If we break through $117 we are probably not going to be able to create any upward momentum in the market," said Rob Kurzatkowski, futures analyst at optionsXpress in Chicago.

In the United States, Tropical Storm Edouard, the fifth of the 2008 Atlantic hurricane season, hit the Texas coast without causing any major disruptions to U.S. energy operations, which also helped to squash supply concerns and bring prices down.

The storm caused minor oil and natural gas outages as it passed through the U.S. Gulf of Mexico, and companies began to fly evacuated staff back to rigs.

Traders kept a watchful eye on news about OPEC member Iran, the world's fourth biggest oil producer, which remains locked in a tense standoff with the West, notably the United States, over its nuclear programme.

Iran says it is only seeking to master nuclear technology to generate electricity and has repeatedly refused to halt its atomic work, prompting the U.N. Security Council to impose three rounds of penalties on Tehran since 2006.

The U.S. State Department said major powers had agreed on Wednesday to consider more U.N. sanctions against Iran after Tehran gave no concrete reply to their demand that it freeze its nuclear activities.

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