* Oil falls as low as $118, lowest since May 5
* Concern of weakening demand pressures oil, commodities
* Iran dispute, Nigeria conflicts lend support
(Adds details, updates prices)
By Alex Lawler
LONDON, Aug 5 (Reuters) - Oil fell to $118 a barrel on
Tuesday, a three-month low, as investors focused on rising OPEC
supply and declining demand in the United States and Europe.
The loss extends a slide from the July 11 record high of
$147.27 a barrel, despite a Gulf of Mexico storm that has curbed
oil output, and is prompting some to say that oil's rally has
run its course for now.
"Most of the hedge funds have been taking profits," said
Angus McPhail of British-based investment firm Alliance Trust.
Asked how far prices could fall, he said: "Probably to about
$100 within the next month if you keep on getting weak demand
data."
U.S. crude <CLc1> was down $1.89 at $119.52 a barrel by 1310
GMT and fell as far as $118.00, the lowest price since May 5.
London Brent crude <LCOc1> lost $2.10 to $118.58.
Other commodities such as copper, gold and platinum also
fell, hit by concern slower economic growth will limit demand
and as the dollar rose, making commodities priced in dollars
more expensive for holders of other currencies.
Tropical Storm Edouard has curbed Gulf of Mexico oil
production, shipping and refining. But traders were discounting
the risk of wider disruption to oil facilities.
"It seems that the market is losing interest in geopolitical
and weather-induced 'props', and instead is becoming more aware
of growing supply/demand imbalances," said Edward Meir, analyst
at MF Global.
Monday's losses came after Reuters survey showed OPEC oil
supply rose for a third consecutive month in July mainly because
of increased output from the world's top exporter Saudi Arabia.
The boost in production from OPEC, source of two in every
five barrels, coincides with soaring energy prices and an
economic slowdown that has eroded consumption in the United
States and Europe.
Investors awaited the outcome of a Federal Reserve meeting
later in the day. The Fed is expected to leave its benchmark
interest rate at 2.0 percent as it faces higher inflation risks
and threats to economic growth.
Tension between major oil exporter Iran and the West over
Tehran's nuclear work, and supply losses and violence in
Africa's top producer Nigeria, provided support for oil prices.
Iran has handed European Union officials its written reply
to a proposal backed by six world powers aimed at defusing a row
over the nuclear programme, Iran's Fars News Agency said on
Tuesday.
(Additional reporting by Seng Li Peng in Singapore and Barbara
Lewis in London; editing by James Jukwey)
