* Lingering concerns over weak U.S economic outlook
* Tropical storm causes minor disruptions to operations
* Nigeria unrest may stop prices from slipping too low
SINGAPORE, August 6 (Reuters) - Oil fell to a 3-month low
on Wednesday, as lingering concerns of a weak U.S. economy
continued to weigh on demand, but conflicts in Nigeria and
Iran's nuclear dispute could counter the bearish effects.
U.S. light crude <CLc1> fell 70 cents to $118.47 a barrel
by 0307 GMT, its lowest since May 5, representing a drop of
nearly 20 percent from mid-July's record high at more than
$147, while London Brent crude <LCOc1> shed 65 cents to $117.05
a barrel.
As oil prices plunged, the dollar climbed to seven-week
peaks against the euro and a major currency basket on Tuesday.
[].
The ICE Futures U.S. dollar index, which measures the U.S.
currency's performance against a basket of six currencies, rose
to 73.990 <.DXY>, its highest since mid-June.
"Western countries are struggling with high inflation,"
said Gerard Rigby of Fuel First Consulting in Sydney. Such a
battle would tend to put the brakes on consumer spending.
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 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. []
Expectations of rising supplies in the U.S. also weighed on
sentiment.
A Reuters poll of analysts forecast U.S. government weekly
inventory data to be released on Wednesday would show a 300,000
barrel rise in crude inventories, a 2.1 million barrel rise in
distillates, and a 1.2 million barrel draw in gasoline stocks.
[]
"Prices will remain on the downward trend but I don't think
they will fall that much, but be rangebound around $118-$120 a
barrel," Rigby said.
This was because geopolitics, which continued to pose a
threat to oil supplies, and demand in India and China, could
counter the bearish impact, he added.
Iran, the world's fourth largest oil producer, delivered a
letter to world powers on Tuesday but gave no concrete reply to
a demand to freeze its nuclear activity, a defiant step the
United States has warned could lead to more sanctions.
[]
Tehran 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 Iran since 2006.
In Nigeria, the world's eighth largest oil exporter,
militant attacks and security concerns in the Niger Delta were
causing the country to lose an average of 650,000 barrels of
crude production per day. []
The Paris-based International Energy Agency says
consumption, which remains strong in emerging countries, will
push oil demand higher this year, despite the global slowdown,
leaving supplies as its main worry.
"Our biggest worries are Nigeria, the hurricane season, etc
... We cannot relax too much. There is very robust demand in
China, India and the Middle East," Nobuo Tanaka, executive
director of the IEA, the adviser to 27 industrialised
countries, told Reuters on Tuesday [].
The IEA expects oil demand to grow this year, by 890,000
barrels per day, its latest monthly oil report shows.
(Reporting by Seng Li Peng; Editing by Clarence Fernandez)
