DALLAS (Bloomberg) - Crude oil fell to a 13-week low amid speculation that Tropical Storm Edouard will miss most offshore oil facilities as it approaches the coast of Texas.

Futures fell as much as $5.60 a barrel, shrugging off port closings and rig evacuations in the Gulf, a threat to oil supplies from Iran and a fire at Valero Energy Corp.'s Houston refinery. Edouard, which may become a hurricane today, is on a course to make landfall in Texas tomorrow morning.

"A market that can't rally on bullish news is a bear market," said Tim Evans, an energy analyst for Citi Futures Perspective in New York. "We're just seeing disappointment that for all of the tropical-storm news, the talk of Iran and Valero's explosion, all of these bullish stories are not pushing the price higher."

Crude oil for September delivery fell $3.69, or three percent, to settle at $121.41 a barrel at 2.49pm on the New York Mercantile Exchange, the lowest close since May 5. New York oil futures have slipped more than $25 a barrel, or 18 percent, from the record $147.27 on July 11 amid lower US fuel demand.

Oil also fell because the Organisation of Petroleum Exporting Countries' crude-oil production advanced for a third month on higher Saudi Arabian output, according to a Reuters report, and amid signs the US economy was slowing, which could curtail demand.

Producers have idled less than one percent of oil output and 7.2 percent of natural gas production in the Gulf of Mexico because of Tropical Storm Edouard, the US Minerals Management Service said.

Apache Corp. halted 8,600 barrels a day of oil production and 130 million cubic feet a day of natural gas output today as it evacuated 110 workers from platforms off the coast of Louisiana because of the storm.

"A lot of the fear about something really affecting those rigs appears to have slackened," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

"The threat is that there's a large enough amount of rainfall that those refineries could be affected for a while."

Edouard may pass close to Exxon Mobil Corp.'s Baytown oil refinery as well as BP Plc's Texas City plant.

Edouard, with maximum wind speeds of 45 miles (75 kilometres) an hour, may strengthen as it moves west along the Louisiana coast, before reaching the Texas shore tomorrow, the Miami-based National Hurricane Center said at 1pm local time. There is a 20 percent chance Edouard will strengthen to a hurricane before striking land, down from 24 percent overnight.

The center of the storm was located about 145 miles south- southeast of Lafayette, Louisiana, and about 240 miles east-southeast of Galveston.

"It doesn't look like it's a big deal yet," Peter Beutel, president of Connecticut-based Cameron Hanover Inc., said in a radio interview. "It doesn't look especially strong right now and refineries aren't producing all-out in any event."

US refineries ran at 87.2 percent of capacity in the week ended July 25, down 6.5 percentage points from a year earlier, as high prices of crude oil and declining gasoline demand cut refining margins.

The hypothetical profit margin, or crack spread, for refining crude oil for September delivery into gasoline was $4.6414 a barrel at 2.30pm New York time, down 52 percent from a year ago.

Gasoline for September delivery lost 8.41 cents, or 2.7 percent, to $3.0002 a gallon on the Nymex after touching $2.9704 a gallon, the lowest since May 5. Futures fell 13 percent last month, the biggest drop since September 2006, as a slowing economy cut demand for the motor fuel.

Regular gasoline at the pump, averaged nationwide, fell 0.6 cent to $3.881 a gallon, AAA, the nation's largest motorist organization, said today on its website. Pump prices reached a record $4.114 a gallon on July 17, as higher prices curbed demand.

"Demand destruction seems to be gaining some credibility and traction," said Kyle Cooper, an analyst at IAF Advisors in Houston. News about Iran testing a new anti-ship weapon this weekend and the storm "would have had the market up $5 three months ago. The fact that it hasn't does indicate some shift in psychology".

US fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.4 percent from a year earlier, the Energy Department said on July 30.

Plunging prices for cocoa, natural gas and sugar are sending the Reuters/Jeffries CRB Index of 19 commodities to its biggest one-day decline since March. It fell 3.4 percent to 401.98 at 4.25pm in New York.

The commander of Iran's Islamic Revolutionary Guards Corps, Brigadier General Mohammad-Ali Ja'fari, announced the weapons test today on state-run news services. He also reiterated a warning that Iran could respond to any attack by closing the Strait of Hormuz, through which a quarter of the world's oil is exported.

Valero's Houston refinery is temporarily operating at reduced rates today after a sulfur release from a loading tank ignited.

Pilots on the Houston Ship Channel, which serves the largest US petroleum port, suspended inbound traffic to Galveston and Texas City yesterday, the US Coast Guard said on its website.

The Louisiana Offshore Oil Port suspended marine operations last night, though it's still making pipeline deliveries, spokeswoman Barb Hestermann said. The LOOP is the biggest US crude-oil import terminal, with the capacity to receive one million barrels a day, or about 11 percent of US imports.

Brent crude oil for September settlement dropped $3.50, or 2.8 percent, to $120.68 a barrel on London's ICE Futures Europe exchange.

Democratic presidential candidate Barack Obama called on the US government to release crude oil from the Strategic Petroleum Reserve to drive down gasoline prices, which have created a drag on the economy.