World oil prices fall on demand fears

World oil prices fell in Asian trade Tuesday as fears about slowing US demand outweighed the increasing likelihood of heightened tensions over Iran's controversial nuclear programme, dealers said.

In morning trade, New York's main contract, light sweet crude for September delivery fell $1.07 to $120.34 a barrel from $121.41 at the close of floor trading in the United States Monday.

London's Brent North Sea crude for September delivery dropped 77 cents to $119.91.

Oil prices fell below $120 in New York and London Monday for the first time in three months after latest US economic indicators signalled weakness in the world's biggest economy, dealers said.

The monthly US Commerce Department survey showed Monday consumer spending, which fuels two-thirds of output, had cooled in June while inflationary pressures accelerated.

The US is the world's biggest energy user and any signs of slowing consumer spending usually weighs down global oil demand projections.

"Slowing demand and the hope for more supply is weighing on the market even as the geopolitics and the weather is getting wild," said Phil Flynn, analyst at Alaron Trading.

Tensions over Iran's nuclear programme surged after Iran missed a deadline over the weekend to respond to an international package of incentives aimed at persuading Tehran to freeze uranium enrichment.

The US State Department said Monday that it and the five other powers holding nuclear talks with Iran had threatened to pursue new punitive action against Tehran.

Traders continued to keep watch on Tropical Storm Edouard, which was expected to make landfall by midday Tuesday around the border of Texas and Louisiana, according to the National Hurricane Center.

The storm was not seen as a threat to oil installations but operators in the crucial US petroleum industry hub said they were taking safety precautions as the storm neared.