Oil prices declined yesterday after latest data showed an increase in the US crude stockpiles and a continued drop in fuel demand.

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

The US Energy Department's Energy Information Administration (EIA) reported yesterday that US 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 the 2.3 million barrels expected by many analysts.

Meanwhile, EIA data showed that US 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.