Oil Falls to $118 as Storm Danger Abates, Demand Concern Grows

Crude oil fell to $118 a barrel on speculation Tropical Storm Edouard won't damage U.S. Gulf facilities and as concern economic growth will slow prompted investors to sell commodities.

Oil dropped to its lowest since May 5 as Edouard's sub- hurricane wind speeds eased concern that offshore and platforms would be damaged by the storm. Gold, platinum and wheat declined on speculation slower growth will curb demand and as a stronger dollar limited the appeal of commodities as an inflation hedge.

``Very little oil production seems to have been shut in by Edouard,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``Gasoline stocks are high enough to limit any crisis from refinery shutdowns, so the market's returning its attention to the weak demand picture.''

Crude oil for September delivery fell as much as $3.41, or 2.8 percent, to $118 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $118.95 at 10:27 a.m. London time.

Oil has lost almost $30 since touching a record of $147.27 a barrel in New York on July 11 as unprecedented fuel costs prompted U.S. consumers to limit spending on fuel.

``Investment monies are exiting away from commodity markets,'' said Robert Laughlin, senior broker at M.F. Global Ltd. in London.

The dollar rose to a six-week high against the euro before a Federal Reserve meeting today at which policy makers may leave interest rates on hold and highlight concern about inflation. The dollar traded at $1.5494 per euro, the strongest level since June 24.

Gulf Production

U.S. producers have idled less than 1 percent of oil output and 7.2 percent of natural gas production in the Gulf of Mexico because of the storm, the U.S. Minerals Management Service said.

Brent crude for September settlement fell as much as $3.77, or 3.1 percent, to $116.91 a barrel on London's ICE Futures Europe exchange, and was at $118.28 at 10:24 a.m. London time.

Gasoline stockpiles probably fell 1.75 million barrels from 213.6 million barrels the week before, according to the median of responses by eight analysts before an Energy Department report this week. Seven analysts predicted a decrease, and one said there was a gain.