Oil prices slip as hurricane threat eases

Oil prices fell back from a record high today after Hurricane Katrina lost strength, lowering the risk that it will disrupt production in the Gulf of Mexico.

The price of a barrel of US light crude stood just above $67 in New York after hitting a record high of $68 yesterday.

News that Hurricane Katrina had been downgraded to a tropical storm and would probably miss oil rigs helped ease concerns over further pressure on oil supplies.

However, experts still expect the oil price to creep up further as demand for fuel intensifies ahead of the winter.

The higher cost of crude has filtered through to the petrol pumps, with drivers’ average monthly fuel bill now almost £100 (€146.64).

Recent figures from the AA Motoring Trust showed the average price of a litre of unleaded petrol was 91p a litre, compared with only 79.6p a litre in January. The average monthly petrol bill has gone up from £87.43 (€127.56) in January to £99.95 (€146.55) in August.

Richard Slape, oil analyst at stockbroker Seymour Pierce, said he expected oil prices to move “somewhat higher” during the course of the winter.

He said: “My suspicion is they will go higher as we head into the fourth quarter. As winter approaches we will see demand tick up for seasonal reasons.”

He added that many experts believed this year’s hurricane season could be strong, adding: “There is a risk that at some point we could have another Ivan moving through the Gulf of Mexico – obviously that would have send oil prices significantly higher.”

Oil prices have risen considerably in the past few weeks, driven by factors such as fires and hurricane damage at US refineries and heightened tensions over the restarting of Iran’s nuclear programme.

Any threats to oil supply in key exporting countries tend to spark buying sprees because of fears that prices could soar even higher in the near term.

However, despite oil prices consistently hitting new highs, they are still below the levels seen during the 1980s when adjusted for inflation.