Oil falls to three-month low of $118

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 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 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.