NEW YORK -- Oil is surging on the expectation that tropical storms will hamper oil production in the Gulf of Mexico and squeeze world supplies.
Benchmark West Texas Intermediate crude on Wednesday jumped $3, or 3.5 percent, to $89.02 per barrel in New York. Brent crude rose $2.61, or 2.3 percent, to $115.50 in London.
The government says Tropical Storm Lee forced 131 oil platforms in the Gulf to evacuate, cutting production by 847,000 barrels per day. That's about 4 percent of the oil that the U.S. consumes every day and enough to raise concerns about world supplies.
The Libyan rebellion already has shut down about 1.5 million barrels of oil exports per day from that country. And a series of fires, oil spills and other problems in the North Sea has helped cut a few hundred thousand barrels per day this summer from an area that already was in steep decline. Analyst Stephen Schork noted that North Sea production has fallen 45 percent since April 2003.
The International Energy ( IENI.OB - news - people ) Agency and the Energy Information Administration warned earlier this year that production losses would create a worldwide shortage in the second half of the year. Developed nations, including the U.S. and European countries, decided in June to release 60 million barrels from emergency stockpiles to help make up the shortfall. Analysts said that may not be enough.
Traders are now watching a tropical depression in the Atlantic. It's still 3,000 miles away from the U.S., but analysts are betting it will be the next of many storms to hamper production this hurricane season.
