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Oil prices jump on tropical storm fears

Oil prices jump on tropical storm fears

Last Updated: 7:48am BST 18/08/2008

Oil prices bounced as the latest tropical storm in the Gulf of Mexico saw producers evacuate workers.

Tropical Storm Fay has already claimed dozens of lives in Haiti and the Dominican Republic.

Royal Dutch Shell pulled out 400 workers from the eastern and central Gulf of Mexico as a precautionary measure but said offshore production was unaffected.

Brent crude for October delivery gained $1.43 to $113.98, while New York light crude rose $1.27 to $115.04.

Fay raked Cuba’s southern coast with gusty winds and heavy rains yesterday while tourists fled the Florida Keys as the storm threatened to reach hurricane strength by the time it hits the United States later today.

Around 50 people died in Haiti when a bus tried to cross a river swollen with rain, adding to the toll after five deaths in Haiti and the Dominican Republic on Saturday. A middle-aged couple drowned in the Jamaican capital Kingston when their car was caught in a flooded crossing.

Fay is expected to avoid most of the offshore production areas in the Gulf and instead strike the Gulf Coast of Florida. However, some computer models predict it may enter eastern Gulf production areas before making landfall on the coast of Alabama or Mississippi.

Fay is the third storm of the 2008 Atlantic hurricane season to menace US offshore oil and natural gas production, which provides 25 percent of US oil output and 15 percent of US natural gas production.

This year’s Hurricane Dolly and Tropical Storm Edouard only temporarily shut fractions of offshore production and did not outweigh geopolitical factors or the US economic outlook in determining crude oil and refined products prices.

Gulf of Mexico producers fear a repeat of 2005 when Hurricanes Katrina and Rita temporarily shut a quarter of US oil and fuel production, sending prices to then-record highs.

However, the market remains preoccupied about slowing economic growth, dealers said.

Prices fell at the end of last week after the OPEC cartel lowered its forecast for oil demand growth, citing the weak global economy.

“Tropical Storm Fay poses some risks to the oil and gas production in the Gulf,” said Victor Shum of energy consultancy Purvin and Gertz in Singapore.

He added that the prices was also supported by buying from traders who regarded market as “oversold” on Friday.

World oil prices have fallen heavily from record highs above 147 dollars in early July.

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