US storms send oil prices higher

LONDON (AFP) - World oil prices swirled higher yesterday amid fears that stormy weather could threaten energy facilities in the US Gulf of Mexico, traders said.

The price of London's Brent North Sea crude for September delivery jumped 1.59 dollars to 72.10 dollars per barrel in late European trade.

New York's main futures contract, light sweet crude for delivery in September, advanced 1.69 dollars to 74.10 dollars per barrel.

Traders eyed potential damage to US oil facilities as a tropical storm built in the Atlantic ocean which experts said could turn into a hurricane by the end of the week.

"Providing support to prices is evidence that the 2007 Atlantic hurricane season has finally started with markets closely watching the developments of Tropical Storm Dean and the forming of Depression 5 in the Gulf of Mexico," said Barclays Capital analyst Kevin Norrish.

"While there is no guarantee at all that the two systems will develop into damaging hurricanes they certainly can bear an important psychological impact, serving as a tangible reminder of what is forecast to be a very active hurricane season."

The US Atlantic hurricane season began on June 1, but experts point out that cyclonic activity typically peaks between August and October.

Also yesterday, the US Department of Energy revealed that American crude inventories had slumped by 5.2 million barrels last week -- more than double a fall of 2.5 million forecast by analysts.

Oil prices had fallen in intra-day trade on Tuesday as equity markets in Europe and the United States tumbled owing to widespread concerns over the slumping US housing market. That stoked fears over the strength of global economic growth -- and crude oil demand.

But news of Tropical Storm Dean sent prices back into positive territory in late trade.

The US government's Climate Prediction Center predicted last week that between 13 and 16 tropical storms were expected to form in the Atlantic basin this year, with seven to nine becoming hurricanes.