Oil prices fell sharply yesterday after forecasters downgraded tropical storm Chris to a depression, easing worries the tempest would damage oil and gas production platforms in the Gulf of Mexico.
US crude oil futures fell $1.11 to $74.35 a barrel while London Brent crude shed 73 cents to $75.83.
Oil traders said the downgrade triggered selling in the oil markets, which had been pumped up earlier in the week on expectations the storm would slash U.S. oil output.
Energy companies operating in the region, still recovering from last year's record hurricane season, said yesterday they were bracing for a possible restrengthening of Chris once it hits the Gulf's warmer waters next week.
Last year's hurricanes temporarily knocked out a quarter of US crude and fuel production, toppling offshore platforms, destroying undersea pipelines, flooding coastal refineries, and sending energy prices to record highs.
"What's clear is that whatever happens to Chris, it's a reminder of the market's sensitivity to hurricanes," said Eoin O'Callaghan of BNP Paribas.
As of June, about 12 per cent of the Gulf of Mexico's 1.5 million bpd of crude oil production remained shut from the record 2005 storm season, along with 9 per cent of the region's 10 bcfd natural gas production.
Crude supply disruptions have also occurred in Iraq, where sabotage halted the recovery of exports from the north of the country, and in Nigeria, where at least 718,000 barrels per day of crude has been shut in, mostly because of militant unrest.
