UPDATE 1-Oil recovers from 3-month low, eyes on supply

                                
 * BP declares force majeure after BTC pipeline explosion
                                
 * Supply concerns in Nigeria, Iran back in focus
                                
 * U.S. crude stock build weighs on demand outlook
 (Updates prices)
                                
 SINGAPORE, Aug 7 (Reuters) - Oil rose on Thursday after
dipping to three-month lows on worries over slowing U.S.
demand, as the market's focus returned to supply concerns in
Turkey, Nigeria and Iran.
                                
 U.S. crude <CLc1> rose 29 cents to $118.87 a barrel by 0601
GMT, regaining some traction after losing more than $6 in the
last three sessions. The contract is almost 20 percent off the
record of $147.27 a barrel hit on July 11.
                                
 London Brent crude <LCOc1> climbed 38 cents to $117.38.
                                
 Supply disruptions and the prospect of escalating tension
between Iran, the world's fourth largest producer, and the West
helped to counter investors' broad-based pullback from
commodities.
                                
 BP Plc <BP.L> had declared force majeure on Azeri crude
shipments from Ceyhan after an explosion late on Tuesday at the
Baku-Tbilisi-Ceyhan (BTC) oil pipeline in eastern Turkey halted
oil flows along the key pipeline. [ID:nWLA7712]
                                
 Supply disruptions in Nigeria due to militant attacks also
supported prices, even as the oil minister said some production
had been resumed after two major pipelines damaged in attacks
last week were repaired. [ID:nL6530499]
                                
 Worries mounted that tension between Iran and the West
would escalate, as the U.S. State Department said major powers
had agreed to consider more U.N. sanctions against the world's
fourth-largest oil producer after Tehran gave no concrete reply
to their demand to freeze its nuclear activities.
[ID:nL6271281]
                                
 But oil's rise on Thursday was tepid, damped by bearish
sentiment on demand in the United States, the world's top
energy consumer, and outflows of investment money.
                                
 "While in our view many of the fundamentally bullish
elements of the market remain in place, buying interest has for
now taken a step back," Harry Tchilinguirian, an oil analyst at
BNP Paribas, said in a research note.
                                
 Open interest, a measure of market liquidity, has fallen in
most key U.S. commodities as a plunge in prices over the last
month has encouraged some investors to exit the market.
[ID:nN06471870]
                                
 In the United States, weekly data from the Energy
Information Administration showed a much steeper-than-expected
build in crude stocks on Wednesday, the latest sign that
soaring fuel costs and an ailing economy are hitting oil
demand.
                                
 Crude oil inventories rose by 1.7 million barrels in the
week to Aug. 1, beating expectations of a 300,000-barrel build.
                                
 Distillate fuel stocks, which include heating oil and
diesel, rose by 2.8 million barrels, also above forecasts.
Gasoline stocks fell by 4.4 million barrels, much steeper than
the 1.2 million barrel draw that analysts had called for.
[EIA/S]
                                
 Further weighing on prices, Tropical Storm Edouard, the
fifth named storm of the 2008 Atlantic hurricane season, hit
the Texas coast without causing any major disruptions to U.S.
energy operations. [ID:nN05408862]
                                
 Oil companies were returning workers to offshore platforms
in the Gulf of Mexico and resuming normal operations at
refineries along the coast.
 (Reporting by Chua Baizhen; Editing by Clarence Fernandez)