Oil prices fall on surprise jump in US crude reserves

LONDON (AFP) - World oil prices fell yesterday as traders reacted to a shock increase in crude reserves in the United States, which is the world's biggest energy consumer.

Prices also pushed lower as Hurricane Dean spared major US energy production facilities in the Gulf of Mexico.

New York's main futures contract, light sweet crude for delivery in October, sank 66 cents to 68.91 dollars per barrel after falling as low as 68.63 dollars -- which was last seen on June 27.

The price of Brent North Sea crude for October delivery shed nine cents to 68.60 dollars per barrel.

The US Department of Energy said yesterday that American crude inventories rose by 1.9 million barrels in the week ending August 17.

That beat analysts' consensus forecasts for a drop of 2.75 million barrels and snapped a six-week run of falls.

Fimat analyst Antoine Halff said the report showed US crude demand was dropping -- prompting some investment funds to exit the oil market.

"Funds need liquidity to meet losses elsewhere," Halff said.

"It's not completely surprising given the numbers -- the rise in crude and the fall in refinery runs show crude is not as much in demand."

The DoE added that US gasoline or petrol reserves sank by 5.7 million barrels -- which was heavier than market expectations for a drop of 800,000 barrels.

Veronica Smart, analyst at the Energy Information Centre, said the market was more interested in crude oil than gasoline statistics.

"Keep in mind the driving season is nearly over and the market's focus is shifting away from gasoline and to crude," she added.

Earlier yesterday, oil prices had staged a modest rebound following sharp falls earlier this week as Hurricane Dean appeared on course to miss vital oil rigs in the US Gulf of Mexico.

Further heavy falls in the coming weeks were however unlikely as the six-month Atlantic hurricane season that started in June usually peaks from September onwards, dealers said.

"There is a good chance that crude oil futures won't fall a lot further even though it crashed through the psychological barrier of 70 dollars," noted Victor Shum, an analyst with energy consultancy Purvin and Gertz.

Thousands of people were ordered yesterday to evacuate threatened areas along the oil-rich Gulf of Mexico, just hours before Hurricane Dean was expected to make a second landfall in Mexico.

The Petroleos de Mexico (PEMEX) state oil company had earlier evacuated all 18,000 personnel from its offshore oil installations in the Gulf of Mexico causing a production drop of some two million barrels a day.