Oil prices rebounded today on fears that a strengthening Hurricane Ike will wreak havoc on production as it passes over the Gulf of Mexico towards Texas.

US light crude for October delivery increased by 72 cents to $103.30, just a day after falling as low as $101.36 as the dollar rose and US Government figures revealed that oil supplies had dropped after companies shut facilities to protect against Hurricane Gustav.

London Brent crude remained below $100 today, but rose by 48 cents to $99.45 a barrel.

Yesterday’s surprise decision by Opec, the 13-nation cartel that produces 40 per cent of the world's oil, to cut output by more than 500,000 barrels per day had caused prices to rally, before falling back later in the day.

After announcing the move, Chakib Khelil, Opec president and Algerian's Energy Minister, said he did not expect the oil price to increase as a result of the cut to supplies.

"My hunch is probably the price will still be going down, despite the decision that we made," he said.

However, the increasing ferocity of Ike, which is expected to hit the US with category four strength on Saturday, has spooked traders. Hurricane Gustav, two weeks ago, was a category three storm.

Authorities yesterday ordered evacuations in low-lying counties along the coast of Texas as Hurricane Ike neared the Gulf of Mexico. The hurricane is expected to hit land somewhere between Corpus Christi and Houston on Saturday morning.

Texas is home to America's biggest collection of refineries and chemical plants, with a quarter of the country's refining capacity.

Oil companies shut their US offshore production facilities this week and have begun closing coastal refineries in Texas in preparation for Ike's arrival. Output from the region has been reduced to less than 5 per cent of normal.

Gustav and Ike combined have reduced Gulf oil production by 14.1 million barrels, while oil refinery utilisation for the week ended September 5 was cut to 78.3 per cent of total capacity, its lowest level since Hurricanes Katrina and Rita in October 2005.

Oil prices are expected to get a further boost from closer ties being forged between Opec and Russia.

A top-level delegation from Opec will travel to Moscow next month to forge closer ties between the oil producers’ cartel and Russia.

Speaking at a meeting of Opec oil ministers in Vienna on Wednesday, Abdullah al-Badri, the group’s secretary-general, said that he and other officials would hold a joint workshop with the Russians on global oil supply, demand and market issues.

Russia already attends Opec meetings as an observer and was represented this week by Igor Sechin, the Deputy Prime Minister, who said that the Moscow talks would focus on “global energy security” matters and ensuring stable prices.

The prospect of closer ties between Opec and Russia, the world’s second-biggest producer after Saudi Arabia, will alarm consumer countries.

Together, Opec and Russia would produce about half of the world’s oil, giving them even greater control over prices if they chose to collaborate.

Mr Badri sought to soothe concerns that the dialogue would have harmful consequences for consumer countries. “I don’t think our co-operation with Russia will affect the consumer because as far as we are concerned we are trying to encourage dialogue between producers and consumers,” he said.

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