Oil prices soar on storm fears

Crude oil prices have soared again after recent falls as Tropical Storm Gustav threatens oil operations in the Mexican Gulf.

Fears the storm could damage offshore rigs pushed light, sweet crude for October delivery as high as $120.50 a barrel on the New York Mercantile Exchange, but prices later settled $2.56 lower at $115.59.

The storm, which is thought to be the worst hurricane since Katrina, is due to hit Louisiana next week.

Oil companies have been evacuating employees from installations in the Gulf of Mexico area. Royal Dutch Shell has already pulled 400 employees out of the area.

Oil prices had been falling from the July peak of $147 a barrel but if operations are damaged, analysts believe this record could be broken.

However, barring any disaster, oil prices should start falling again soon to under $100 a barrel, several commentors have speculated.

Economist Robin Bew predicts the slowing economies of Europe and America will have a knock-on effect in the emerging world and draw oil to lows of even $85 a barrel.

Mr Bew, chief economist at the Economist Intelligence Unit (EIU), told Cantos: "All of that is acting to slow oil demand growth in the emerging world and you're actually seeing oil demand fall in the developed world.

"Those things combined mean that the oil market, which was already in surplus, becomes an even greater surplus going forward and that a lot of speculative money will start to come out of the markets."

Billionaire investor George Soros has also predicted the price of oil will slump dramatically, once Britain and the US fall into recession.