Oil falls as dealers shrug OPEC cut

By Richard Valdmanis

NEW YORK (Reuters) - Oil prices dipped to fresh five-month lows on Wednesday as weak demand and a strong dollar offset a surprise OPEC production cut agreement and back-to-back hurricanes in the Gulf of Mexico that have started cutting deeply into U.S. energy supplies.

U.S. crude fell 68 cents to settle at $102.58 a barrel after dropping as low as $101.36, the lowest since early April. London Brent crude fell $1.37 to $98.97.

The losses came after the International Energy Agency cut its world oil demand forecasts for this year and next year as high prices and mounting economic troubles cause consumers and businesses to conserve.

U.S. oil demand is already running about 3.8 percent below last year, according to government data.

Oil and other commodity prices were also pressured lower on Wednesday by gains in the U.S. dollar -- a factor that weakens commodities by undermining the purchasing power of buyers using other currencies. The dollar scaled a one year peak against a basket of currencies on Wednesday.

Oil prices have dropped about 30 percent since a record high over $147 a barrel in mid-July, hit by concerns over slowing consumption and a rebounding dollar.

Wednesday's losses were tempered by news OPEC decided to lower its production ceiling to 28.8 million bpd from earlier targets of 29.67 million bpd.

Analysts said the group was seeking to support the market at around $100 a barrel, though some were sceptical the cartel would follow through on the agreement.