World oil prices surged higher today as Hurricane Dean tore towards the Gulf of Mexico and traders were lifted by the surprise cut in US interest rates.

US crude rose by $1.10 at $72.10 a barrel after the Federal Reserve move to “restore order in financial markets”, while Brent crude in London rose 87 cents higher at $70.64.

Oil had already gained ground on renewed fears that Hurricane Dean could cause serious damage in the Gulf, which accounts for nearly a third of US oil production and was devastated by hurricanes two years ago.

Dean reached wind speeds of 100mph as it approached the Lesser Antilles in the Caribbean.

Tropical Storm Erin dropped 7 inches (18cm) of rain on San Antonio and Houston overnight and claimed several lives.

Shell has already closed a natural gas platform and removed 188 staff from the Gulf.

The Houston-based Transocean Inc, which operates the region’s largest deepwater rig, evacuated 11 staff on Wednesday.

Before the US rate cut, traders in London said that oil prices could fall by at least $6 a barrel over the coming days on mounting concerns that the turmoil on financial markets could knock global demand for crude.

The price of oil, commodity metals and even the traditional safe-haven gold fell sharply yesterday.

Oil prices dropped by more than $2 a barrel yesterday, matching a slide across the commodity board.

Spot gold fell to $648.80 an ounce in New York on Thursday, after dropping as low as $641.10 at one stage, the lowest level since June 28.

Eric Wittenauer, energy analyst at A.G. Edwards, said: “The Fed move is supportive for oil. It is basically suggesting that the Fed is going to take action to stem any decline or slowdown in the economy.”

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