Oil: Storm worries decrease

Oil prices slipped on Thursday after Tropical Storm Chris weakened in the Caribbean Sea, easing worries that it could eventually threaten oil and gas platforms in the US Gulf of Mexico.

London ICE Brent crude LCOc1 was trading 19 cents lower at US$76.70, while US light crude CLc1 fell 36 cents to US$75.45 a barrel. Oil prices had risen by about a dollar on Wednesday on storm fears.

Tropical Storm Chris' top sustained winds slowed to near 40 mph (65 kph) on Thursday, making it only barely a tropical storm and government forecasters said it could dissipate over the coming days.

Hurricanes last year shut in a quarter of US crude and fuel output and sent oil to then-record highs. Around 12 per cent of the US Gulf of Mexico's 1.5 million barrel-per-day (bpd) oil output is still offline.

But for now, traders and analysts said the oil market was well-supplied.

"There is a lot of noise about politics and geopolitics, but my sense is there is plenty of oil around," said Francisco Blanch of Merrill Lynch.

US government data released on Wednesday showed crude oil stocks fell by a higher-than-expected 1.8 million barrels to 333.7 million barrels last week, but they were 12.8 million barrels higher than the same time a year ago.

Petrol stockpiles fell 100,000 barrels and were 2.4 million barrels higher than during the same week in 2005, the data from the Energy Information Administration showed.

Supplies are tighter in Europe, however.

August supplies of North Sea benchmark crudes have fallen to record lows because of field maintenance, which helps to explain the unusual premium of Brent futures over US crude futures.

The shortage of North Sea crude has been aggravated by the shut in of at least 718,000 barrels per day of similar quality, light sweet Nigerian crude, chiefly because of militant unrest.

Traders also remain concerned about possible disruption of Middle Eastern supplies.

Israeli jets pounded Lebanon and troops fought Hizbollah guerrillas on Thursday as world powers struggled for a plan to end the war.

Analysts say the conflict could complicate the quest for a solution to the West's dispute with oil producer Iran over its nuclear ambitions.

Iran funded and armed Hizbollah in the 1980s, but says its support now is only moral and political.

- REUTERS