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Oil prices higher amid Hurricane Felix

by Staff Writers
London (AFP) Sept 3, 2007
World oil prices climbed on Monday as traders worried that Hurricane Felix might yet force the closure of vital oil rigs in offshore Mexico.

Trading was subdued, however, owing to a public holiday in the United States.

In London, the price of Brent North Sea crude for October delivery rose 66 cents to 73.35 dollars per barrel.

New York's main futures contract, light sweet crude for delivery in October, gained 19 cents to 74.48 dollars per barrel.

US floor trading was shut Monday for Labor Day, leaving dealers able to trade only electronically. London oil trading is entirely electronic.

"Prices firmed up today as markets remain wary of the potential disruptive effects of Hurricane Felix," Barclays Capital oil analyst Kevin Norrish said in London.

"Oil production operations ... have not been affected yet, but companies will remain alert and precautionary shut-downs could occur in the next few days," he added.

Hurricane Felix ripped across the warm waters of the Caribbean on Monday, towards Honduras and Belize, after damaging homes and power lines in Grenada as it gained "potentially catastrophic" class-five strength.

Felix became the second hurricane of the Atlantic storm season on Saturday.

Oil traders are concerned that the hurricane might cause Mexico's state-owned oil company Pemex to again shut offshore energy production.

Last month, Hurricane Dean forced Pemex to shut down its oil output of approximately 2.7 million barrels per day.

Crude oil prices had rebounded last week owing to falling US energy reserves and a recovery for global equities.

Many commodity prices had slumped earlier in August on fears of a global economic slowdown linked to losses in the US subprime mortgage market -- high-risk home loans to which many banks and investment funds are exposed.

Traders also remain on alert over weak US energy stockpiles.

Motor fuel inventories remain far below normal levels as refiners in the United States have struggled to keep up during the peak demand season, which draws to a close on Monday as Americans drive home from their holiday spots.

Meanwhile the market does not expect the oil-producing cartel OPEC to raise production when it meets in September.

Twenty-one out of 23 analysts polled by Thomson Financial said the cartel was likely to keep production levels unchanged at its September 11 meeting on worries that volatility on equity markets might crimp oil demand.

"OPEC is like everyone else. It is going to wait for more clarity before they make any decisions on policy," said Alaron analyst and trader Phil Flynn.


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