Oil Prices Decline as U.S. Inventory Increases and Demand Drops

oil prices declined Wednesday after latest data showed an increase in the U.S. crude stockpiles and a continued drop in fuel demand.

Light, sweet crude for September delivery dipped 59 cents to settle at 118.58 U.S. dollars a barrel on the New York Mercantile Exchange. Futures fell as low as 117.11 dollars a barrel, the lowest trading price since early May, a 20 percent down from the record of 147.27 dollars a barrel reached on July 11.

The U.S. Energy Department's Energy Information Administration (EIA) reported Wednesday that U.S. crude inventories rose by 1.7 million barrels to 296.9 million for the week ended August 1. The stockpiles of distillate fuel, including diesel and heating oil, jumped 2.8 million barrels to 133.3 million barrels, more than the2.3 million barrels expected by many analysts.

Meanwhile, EIA data showed that U.S. fuel demand averaged 21.7 million barrels a day during the four weeks ended August 1, 2.6 percent down from a year earlier.

The dollar gained strongly against the euro and the sterling pound Wednesday, which made crude less appealing to buy as a hedge against inflation.

In London, Brent crude for September delivery fell 70 cents to settle at 117 dollars a barrel on the ICE Futures Exchange.