* U.S. crude and products stocks rise.
* Poor U.S. economic outlook weighs on demand
* Washington to send envoy to Iran talks
By Santosh Menon
(Adds comment, updates prices)
LONDON, July 17 (Reuters) - Oil held above $134 a barrel on
Thursday, after an initial fall that seemed like a continuation
of its recent tumble on mounting evidence of fading demand in
the United States and easing tensions between the U.S. and Iran.
A fresh attack on an oil pipeline in Nigeria, the world's
eighth-biggest oil exporter, shut 20,000 barrels per day of
crude oil production, underscoring the risk to supplies.
U.S. crude futures <CLc1> were 10 cents lower at $134.50 a
barrel at 1300 GMT, off lows of $133.02.
It slid $4.14 on Wednesday, taking the drop from last
Friday's all-time peak of $147.27 to around $13.
London Brent crude for September <LCOc1> also shed 11 cents
to $135.70 a barrel.
"Poor consumer demand and recovering OPEC supply may finally
be showing up in the numbers, setting the stage for an extended
price retreat," said Antoine Halff, deputy head of research,
Americas, at Newedge USA in New York.
Dealers said Wednesday's losses were triggered by a
3-million barrel increase in U.S. crude stocks, according to
data from the Energy Information Administration. []
Gasoline and distillate inventories also rose.
"Besides the increase in crude, gasoline, and distillate
stocks, it's interesting to note that demand in the United
States remains relatively weak as well," said David Moore,
analyst at Commonwealth Bank of Australia.
The widely-watched government report showed U.S. oil
products demand running at 2.0 percent below year-ago levels,
another sign that soaring prices are cutting into consumer
demand for fuel.
Adding to pressure on oil prices, a senior U.S. official
said on Tuesday the United States planned to send an envoy for
talks this weekend between Iran and major powers over Tehran's
nuclear programme.
"It doesn't help support prices that Washington, for all its
belligerent rhetoric towards Iran, is in fact giving signs that
it is turning away from the military option and increasingly
resorting to a policy of engagement with Tehran," Newedge's
Halff said.
Washington had said it would not be involved in any
pre-negotiations with Iran unless it gave up nuclear enrichment.
The standoff between the Islamic Republic and the West has
helped boost oil prices.
(Additional reporting by Luke Pachymuthu in Singapore and Gene
Ramos in New York; editing by James Jukwey)
