LONDON, 21 July 2005 — World oil prices weakened yesterday as traders digested a smaller-than-expected drop in US crude inventories despite hurricane conditions in the Gulf of Mexico.

New York’s main contract, light sweet crude for delivery in August, lost 1.16 dollars to $56.30 per barrel in early deals. The contract was due to expire at the close. In London, the price of Brent North Sea crude oil for delivery in September lost 90 cents to $56.46 per barrel.

The Department of Energy said US crude oil stocks fell by 900,000 barrels to 320.1 million barrels for the week ending July 15.

Analysts’ forecasts were for a 3.45-million drop in the wake of production shutdowns in the Gulf of Mexico, caused by Hurricane Dennis - whose onset halted most US oil production in the region around July 10.

The DoE also said petrol or gasoline stocks dropped by 1.3 million barrels, less than forecasts of a 1.5-million decrease. But levels of distillate products, used for heating oil and diesel, rose by a greater-than-expected 2.3 million barrels for the week, the DoE said. That beat expectations of a 1.7-million build.

Meanwhile, the dollar got a brief — but temporary — lift here yesterday against the euro after US Federal Reserve Chairman Alan Greenspan said US interest rates would keep rising at a measured pace.

The single European currency in late-day trade was at 1.2046 dollars against 1.2034 late Tuesday in New York. But at one point during Greenspan’s appearance in Congress the euro fell to 1.1997 dollars. The dollar was meanwhile trading at 113.47 yen after 112.68 on Tuesday. The euro was changing hands at 1.2046 dollars against 1.2034 late on Tuesday in New York, 136.59 yen (135.74), 0.6959 pounds (0.6914) and 1.5636 Swiss francs (1.5641). The dollar stood at 113.47 yen (112.68) and 1.2992 Swiss francs (1.2994).

Meanwhile, European stock markets were mixed yesterday. The London FTSE 100 index gained 0.26 percent to 5,215.2 points, and the Frankfurt DAX 30 added 0.29 percent to 4,784.50 points, but in Paris the CAC 40 lost 0.13 percent to 4,418.39. In New York, at 1550 GMT, the Dow Jones Industrial Average was down 31.13 points (0.29 percent) at 10,615.69, and the NASDAQ composite shed 3.77 points (0.17 percent) to 2,169.41. The broad-market Standard and Poor’s 500 index was off 1.93 points (0.16 percent) at 1,227.42.