Oil prices climb amid markets recovery

NEW YORK (AFP) - World oil prices advanced yesterday as calmer global financial markets eased concerns about weaker economic growth that would dampen energy demand, traders said.

New York's main oil futures contract, light sweet crude for delivery in October, closed up 57 cents at 69.83 dollars per barrel.

On Wednesday, New York crude had dipped to 68.63 dollars, its lowest point since June 27, following news of a shock weekly increase in crude oil reserves in the United States.

In London, the price of Brent North Sea crude for October delivery settled 1.16 dollars higher at 69.86 dollars per barrel.

"Crude futures were higher today following gains in other commodities and rallying world equity markets," said Sucden analyst Andrey Kryuchenkov.

"Many investors now speculate that the US Federal Reserve Bank will still have to cut its benchmark interest rate, given the recent subprime crisis.

"However, it is far too early to get overly optimistic, as one bad report or a warning from a big bank or a hedge fund can send shares tumbling again, which could put more pressure on crude futures."

In recent weeks, falling share prices had sparked concerns over the outlook for the global economy and for worldwide oil demand.

Futures had been mixed on Wednesday as traders digested the latest weekly snapshot of American crude reserves from the US Department of Energy (DoE).

American crude inventories rose by 1.9 million barrels in the week ended August 17, the DoE said.

That confounded analysts' consensus forecasts for a drop of 2.75 million barrels and snapped six straight weeks of declines.

Elsewhere, traders were assessing the impact of Hurricane Dean, which has forced Mexico to slash offshore production.

Petroleos de Mexico (PEMEX) said yesterday that technicians were set to return to offshore oil platforms in the Gulf of Mexico where production should be back to normal levels by next week.

The state oil company had earlier evacuated all 18,000 personnel from its installations in the Gulf of Mexico, causing a production drop of 2.65 million barrels a day.

"There is some concern about delays in Mexican crude deliveries to the US in the wake of Hurricane Dean," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

The weather remains a key factor for oil prices as September is the peak hurricane season in the United States, analysts said. US oil production facilities in the Gulf of Mexico can be threatened by such vast storm systems.

"Going forward in the next few weeks, the oil market faces upward exposure because September is the peak hurricane month," Shum added.