Oil prices climbed to $73 this morning as another storm brewed in the Caribbean with the potential to reach the Gulf of Mexico next week.
US crude for October delivery was up 63 cents at $72.99 a barrel by earlier this morning, after gaining 60 cents yesterday. London Brent crude for October rose 60 cents to $73.28.
A spinning band of squalls in the southeastern Caribbean was on the verge of becoming Tropical Storm Ernesto by today, expected to head northwest towards the Gulf of Mexico by the middle of next week, forecasters said.
Forecasters expected Tropical Storm Debby to strengthen and possibly become the season's first hurricane, but saw its path heading away from the US Gulf Coast, where production was battered by hurricanes Katrina and Rita last year.
Support also came from Iran's nuclear dispute with the West that could lead to United Nations sanctions against the world's fourth-largest oil exporter and from strong Chinese oil demand.
US oil output also fell 90,000 barrels per day on Wednesday when BP cut its Prudhoe Bay production in Alaska to 110,000 bpd after a technical fault that would last several days.
The Alaskan field had previously been running at about half its normal capacity after pipeline corrosion. The reduced output helped push down US crude oil stocks last week, though the drop was smaller than expected.
The two-day price rally shrugged off a near 2 per cent slide mid-week, after US gasoline inventories unexpectedly rose 400,000 barrels despite higher demand, easing worries about stocks being run down during the peak summer driving season.