Oil price rises on hurricane fear

The price of oil climbed on Wednesday as Tropical Storm Gustav headed towards the Gulf of Mexico - home to many offshore energy installations.

US light, sweet crude settled up $1.88 at $118.15 a barrel, having passed $119. London Brent crude gained $1.59 to close at $116.22 a barrel.

Royal Dutch Shell is among the firms evacuating staff as a precaution.

The oil price was also bolstered by official figures showing that US crude stockpiles fell unexpectedly last week.

Stockpiles dropped by 100,000 barrels to 305.8 million barrels in the week ending 22 August, the Energy Information Administration (EIA) said.

Analysts had been expecting an increase of about 1.5 million barrels.

The EIA also said that petrol stocks fell by less than expected last week, while supplies of distillates, such as heating oil and diesel, were flat at 132.1 million barrels.

More declines?

There are concerns that if it hit the region's oil infrastructure, Gustav may be the biggest storm to cause damage since hurricanes Katrina and Rita in 2005.

"After 2005, when a hurricane blows in, guys tend to prepare for the worst," said Steve Mosby, vice president at ADMO Energy.

"It's a situation where simply you don't want to be the guy caught short, because someone will be."

The oil price is still well off the highs of about $147 seen in July.

Many analysts expect that US demand will slow as the economy contracts, pushing prices lower.

Earlier this week, the EIA's chief, Guy Caruso, said that crude oil prices "could" fall below $100 per barrel over the next 18 months - due to slowing demand and increased production.

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