* 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 and has prompted 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 $1.83 at $119.58 a barrel by 1515
GMT, up from a session low of $118.00, the lowest price since
May 5. London Brent crude <LCOc1> lost $2.26 to $118.42.
Other commodities such as copper, gold and platinum also
fell, hit by expectations slower economic growth would limit
demand and as the dollar rose, making commodities priced in
dollars more expensive for holders of other currencies.
The dollar rose to a six-week high as 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.
Potentially bullish factors for the oil price included
Tropical Storm Edouard, which 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.
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, also provided some 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.
Technical analysts, who base price predictions on analysis
on previous movements, have said that in the near term prices
could find support around $115 a barrel.
Some have said the market could fall as far as $60 a barrel
before the long-term bull trend is finally extinguished.
(Additional reporting by Seng Li Peng in Singapore and Barbara
Lewis in London; editing by William Hardy)
