Oil price hits two-month low in London

LONDON (AFP) - The price of crude oil slid to a two-month low point here yesterday as Hurricane Dean remained on course to avoid hitting vital energy facilities in the US Gulf of Mexico, traders said.

The price of Brent North Sea crude for October delivery dropped to 68.23 dollars per barrel -- the lowest level since June 11.

It later stood at 68.60 dollars per barrel, down 1.25 dollars from Monday's close.

New York's main futures contract, light sweet crude for delivery in September, shed 1.51 dollars to 69.45 dollars per barrel.

"Crude futures were still lower, extending last night's losses on news that Hurricane Dean would not hit major oil facilities in the Gulf of Mexico," said Andrey Kryuchenkov, an analyst at the Sucden brokerage in London.

Hurricane Dean yesterday pounded the Yucatan Peninsula on its way to the oil-rich Gulf of Mexico after slamming onto Mexico's Caribbean coast as a monstrous category five storm.

Dean lost much of its punch as it swirled over land but could regain strength when it hits the warm Gulf of Mexico waters, probably late yesterday.

The International Energy Agency said yesterday that it was slightly concerned about Dean's impact on Mexican oil production -- but believed its passage will not affect global oil markets.

"What could worry us a bit is that it will pass over Mexican production," William Ramsay, the deputy executive director of the IEA told French radio FM.

"We are not very worried from the point of view of the global market" even if there are "tensions on the market due to the insufficiency of refining capacity and limited production by OPEC," he said.

He said of the two million barrels a day produced offshore in Mexico, "1.5 million barrels a day is on the route of the hurricane."

The IEA, an organisation which defends the energy interests of the industrialised countries, has repeatedly called for the Organization of Petroleum Exporting Countries (OPEC) cartel to pump more crude.

But the 11-nation OPEC cartel, which holds its next output meeting in September, has resisted the calls to ramp up production.

Elsewhere, traders were cautious about choppy global stock markets.

Traders are concerned that slowing global growth could dampen world demand for crude oil.

"Oil investors are keeping a close watch on developments in global equity markets for signs of more turmoil," Kryuchenkov added.

"Uncertainty remains and market participants fear there is room for more liquidation if concerns over the credit market persist and we see more indications that the subprime crisis could spread into a broader economy."