WASHINGTON (AP) - Oil prices pulled back by more than $2 a barrel Monday as concerns eased about Tropical Storm Ernesto's threat to Gulf of Mexico energy production.
Gasoline and natural gas futures also fell sharply, and analysts said the downward trend was supported by rising supplies and indications of a weakening economy.
With weather forecasters predicting that Ernesto could strengthen to a hurricane and strike Florida, ''it's more of a concern for orange juice futures,'' said Wachovia analyst Jason Schenker.
Light sweet crude for October delivery fell $2.01 to $70.50 a barrel on the New York Mercantile Exchange, where gasoline futures fell by more than 9 cents to $1.80 a gallon and natural gas declined by 71.7 cents to $6.44 per 1,000 cubic feet.
October Brent at London's ICE Futures exchange, open despite a public holiday in Britain, fell 99 cents to $71.73 a barrel.
Hurricane Ernesto was downgraded to a tropical storm late Sunday as it lashed Haiti's southern coast with heavy rain and flooded homes. But Schenker said it was the apparent trajectory of the storm _ forecasters believe it will veer to the northeast _ that was equally significant for oil markets.
Most U.S. offshore oil and natural-gas facilities are located in the eastern and central Gulf.
Hurricanes Katrina and Rita showed last year just how vulnerable oil and natural platforms and pipelines are to powerful storms, and how severe flooding along the Gulf Coast was capable of shutting down oil refineries and natural-gas processing plants. The region's fuel production declined for months, tightening supplies and sending prices higher.
Earlier in the year, energy industry officials said they would be better prepared to respond to storms this summer, mainly because better communication plans are in place.
While fears that U.S energy production would be hurt by Ernesto subsided, world energy markets remained on edge over Iran's stand-off with the West over its nuclear program.
Traders are concerned about the possibility that Iran, the world's fourth-biggest oil producer, may block oil exports if it suffers sanctions by the United Nations over its nuclear program. The U.N. set an Aug. 31 deadline for Iran to halt its nuclear program, but Tehran said Tuesday that it wants to negotiate further.
The United States said Iran's response fell far short of U.N. Security Council demands it halt uranium enrichment.
Still, Schenker believes the likelihood is quite small that Iran would cut off its oil exports _ or that the West would take any actions that would force Tehran to retaliate in such a way.
''We (the United States) don't want them to cut their oil exports, and they don't want to cut their exports,'' said Schenker, adding that oil could very well trade in the $60-$65 range in 2007, assuming economic growth continues to taper off.