Oil prices rose yesterday as tropical storm Isaac caused ripples in the crude market, and traders feared supply from the Gulf of Mexico would be interrupted.
Hopes of renewed economic stimulus in the United States and Europe raised the prospect that the effect of the storm on oil prices can be alleviated by central bank action.
Futures on the New York Mercantile Exchange rose by more than 1 per cent to above $97 a barrel.
Isaac is forecast to pick up pace, with accelerating wind speeds elevating it into the category 2 hurricane as it descends upon the oilrigs of the Gulf of Mexico, which accounts for about 23 per cent of oil production in the US, as well as 7 per cent of natural gas output, according to the government's energy information administration. The storm could have an even greater impact on the supply of petrol and electricity, as the Gulf of Mexico houses 44 per cent of America's crude refining capacity, and almost a third of its natural gas processing capacity.
The storm will temporarily shut down 85 per cent of US offshore oil pumps, and more than two thirds of offshore gas production, estimate meteorologists at Thomson Reuters.
Similarly, a string of smaller production halts and delays in Europe and the Middle East are strengthening the price of Brent, the European crude benchmark. The prospect of increasing tension in the Arabian Gulf owing to Iran's insistence on further building its uranium enrichment capacities is also seen by analysts as a contributing factor.
Oil traders expect the US and European central banks to provide upwards momentum to the crude market.
A speech delivered by the Federal Reserve chairman Ben Bernanke at the annual symposium for central bank officials and economists at Jackson Hole, Wyoming, this week will be closely scrutinised for hints at a third round of quantitative easing - or more money being pumped into the economy.
A meeting by the European Central Bank early next month will be subjected to similar tea-leaf reading.
In spite of the current and anticipated upward pressure on prices, some analysts predict a slump by the end of the year.
Capital Economics, which forecast Brent to drop below the $100 a barrel mark before the year is out, said renewed concerns over the health of the euro zone and the release of strategic stockpiles would deflate prices. "The recovery in oil prices since June appears to have been boosted by an overly rosy view of the prospects for the world economy," the consultancy said in a report.
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