By Christopher Johnson
LONDON (Reuters) - Oil benchmark Brent crude hit a three-month low on Wednesday after a rise in U.S. crude inventories highlighted increasing global supply and concerns over weak demand.
Brent fell 93 cents to a low of $71.23 a barrel, its weakest since April 17, before recovering to around $71.70 by 1100 GMT.
U.S. light crude was down 55 cents at $67.53, not far off Tuesday's one-month low of $67.03 per barrel.
Oil markets have fallen over the last week as Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and Russia increased production and as some supply disruptions eased.
"The correction in the oil price represents something of a convergence between fundamentals and physical realities," said David Reid, lead crude market analyst at consultancy JBC Energy.
"We expect a fairly rapid lengthening in the (global oil supply) balance," Reid added.
The U.S. oil market has been tight this year but data on Tuesday from the American Petroleum Institute showed an unexpected rise of over 600,000 barrels in crude inventories. [API/S]
Analysts had forecast a decline of 3.6 million barrels in U.S. crude stocks for the week through July 13. [EIA/S]
Data from the U.S. government's Energy Information Administration is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.
"Oil is trading lower this morning on the back of the API release, and price action later today will largely depend on what the EIA release," said ING commodities strategist Warren Patterson.
"A number broadly similar to the API could put some further pressure on the market later this afternoon."
Investors have also begun to worry about the impact on economic growth and energy demand of the trade dispute between the United States and its trading partners, including China.
Trade tension between the United States and China could drag on the global economy, BMI Research said.
"The economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity," BMI said. "Slowing trade growth will weigh on physical demand for oil."
Kansas City Federal Reserve Bank President Esther George said on Tuesday uncertainty over U.S. trade policy could slow the economy, even if recently imposed tariffs are too small to have a big impact.
Trade policy was a "significant" downside risk to the outlook for economic growth, George said.