MercoPress. South Atlantic News Agency

Hurricane Gustav downgrade eases oil price

Oil prices have fallen after weather forecasters said Hurricane Gustav had weakened as it hit the US Gulf of Mexico coast south-west of New Orleans.

Gustav weakened and was downgraded from a category three to level one after hitting Fourchon, a port in Louisiana. US light crude oil fell $4.24 to $111.20 a barrel by late trade in Europe. London's Brent crude settled down $4.64 to $109.41 a barrel. The US has said it will tap into emergency energy stocks if needed. "It looks like Gustav is not going to be as strong a storm as the market feared," said Phil Flynn, an analyst with Alaron Trading. While the hurricane was downgraded it has yet to be seen what the impact of the damage is longer term, said analysts. The US-based National Hurricane Centre said the "maximum sustained winds have decreased to near 110mph". In 2005, devastating Hurricane Katrina - rated at Category Three - badly damaged 100 of the 4,000 US offshore oil and gas facilities in the Gulf of Mexico. According to firm officials and US government data, 13 oil refineries - or 15% of the country's fuel output, were closed, said news agency Reuters. Hurricanes are graded from One to Five, with Five being the strongest. Analysts said the experience of Katrina in 2005 meant that the energy sector and other industries in the US Gulf of Mexico were now much better prepared. "This is Katrina's legacy," Mr Flynn. "The industry is much more prepared and taking things much more seriously. That's why so much has been shut down so quickly." New Orleans, Louisiana's main city, and surrounding areas have been evacuated ahead of Gustav.