US crude futures fell on Wednesday, heading for a decline of 7.7 per cent in their biggest monthly loss since May, on fears that another recession in the United States and a debt crisis in the euro zone could cut fuel demand.

An industry report showed a higher than expected rise in US crude oil inventories last week, causing futures to fall from a three-week high settlement on Tuesday.

Investors also eyed storms brewing in the Atlantic and the northwestern Caribbean Sea for possible supply disruptions.

On the New York Mercantile Exchange, crude for October delivery snapped four days of gains and fell 35 cents to $88.55 a barrel by 0028 GMT after hitting an intraday low of $88.51.

In London, ICE Brent crude for October delivery rose 1 cent to $114.03 a barrel.

US crude's discount against Brent crude was at $25.45, slightly wider than Tuesday's close.

US crude oil inventories surged last week as imports rose and refinery utilization dropped, while gasoline saw a big draw, data from the American Petroleum Institute showed.

Crude stockpiles rose 5.1 million barrels for the week to Aug. 26, well over analyst expectations for a 400,000 barrel gain.

Investors were eyeing the development of Tropical Storm Katia in the Atlantic which could become a hurricane by late Wednesday or early Thursday, according to the National Hurricane Center.

A tropical wave over the northwestern Caribbean Sea has a 10 per cent chance of becoming a cyclone in the next 48 hours, and could move into the western Gulf of Mexico, home to a large concentration of oil and natural gas facilities.-Reuters