Lower petrol prices helped boost US consumer sentiment in August, according to the latest Conference Board survey.

The research body’s Consumer Confidence Index rose to 56.9, from 51.9 in July. Analysts had forecast a rise to 53.

But while the surge in sentiment came as oil prices fell from record highs, shoppers remained worried about their current situation and the jobs market.

The figures are closely watched as consumer spending accounts for two-thirds of all US economic activity.

But despite sentiment improving for the second month in a row, the index – which is based on responses from 5,000 US households – still remains about half the level it was at a year ago.

“Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year, said Lynn Franco, director of the Conference Board Consumer Research Center.

She added that while Americans appear to be worried about the current economic situation those worries – centred on the labour market and business conditions – are easing off.

Meanwhile, the board also found that consumers’ expectations for coming months improved at their best rate since November 2005.

But Ms Franco said: “Overall readings are still quite low by historical standards and it is still too early to tell if the worst is behind us.”

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The price of oil climbed on Wednesday as Tropical Storm Gustav headed towards the Gulf of Mexico – home to many offshore energy installations.

US light, sweet crude settled up $1.88 at $118.15 a barrel, having passed $119. London Brent crude gained $1.59 to close at $116.22 a barrel.

Royal Dutch Shell is among the firms evacuating staff as a precaution.

The oil price was also bolstered by official figures showing that US crude stockpiles fell unexpectedly last week.

Stockpiles dropped by 100,000 barrels to 305.8 million barrels in the week ending 22 August, the Energy Information Administration (EIA) said.

Analysts had been expecting an increase of about 1.5 million barrels.

The EIA also said that petrol stocks fell by less than expected last week, while supplies of distillates, such as heating oil and diesel, were flat at 132.1 million barrels.

More declines?

There are concerns that if it hit the region’s oil infrastructure, Gustav may be the biggest storm to cause damage since hurricanes Katrina and Rita in 2005.

“After 2005, when a hurricane blows in, guys tend to prepare for the worst,” said Steve Mosby, vice president at ADMO Energy.

“It’s a situation where simply you don’t want to be the guy caught short, because someone will be.”

The oil price is still well off the highs of about $147 seen in July.

Many analysts expect that US demand will slow as the economy contracts, pushing prices lower.

Earlier this week, the EIA’s chief, Guy Caruso, said that crude oil prices “could” fall below $100 per barrel over the next 18 months – due to slowing demand and increased production.

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The price of oil climbed, reversing earlier falls, on the back of the weakening dollar.

US light sweet crude added $1.16 to 114.03 a barrel, while in London, Brent crude added 99 cents to $112.93.

The dollar weakened against the euro after official US data showed inflation was quickening, helping push up oil and other commodities such as gold.

Investors tend to buy commodities as the greenback weakens because it makes such investments relatively cheaper.

Earlier in the day, oil had fallen below $112 a barrel after Tropical Storm Fay avoided oil operations in the Gulf of Mexico.

Other commodities to rise on Tuesday included nickel, used largely for making steel, which climbed 7.3% to end at $19,395 a tonne.

“The market is going to be fairly close to balance rather than being oversupplied, and there is the prospect that the stainless steel market will recover in the next few months on a year-on-year basis,” said Dan Smith, analyst at Standard Chartered.

And copper for delivery next month added 12 cents to $3.4350 per lb in New York.

Commodities are seen as safe investment when inflation pressures are increasing.

Future falls?

Though oil prices have risen, they are far from the record of more than $147 a barrel reached in July.

And analysts are predicting that oil could fall given the current economic slowdown dents demand.

US figures due out on Wednesday expected to show a rise in stockpiles, underlining the decline in demand.

Meanwhile last week’s figures from Opec hinted that global demand for oil is set to slow.

The oil cartel’s monthly report predicted global oil demand would grow by one million barrels a day in 2009 – 30,000 barrels lower than its previous forecasts, and its lowest growth since 2002.

But current geopolitical tensions in Georgia, where Russian troops are pulling out of the region, and in Pakistan, following President Pervez Musharraf’s resignation, are likely to support prices, experts added.

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World oil prices have edged slightly higher amid concerns that oil operations in the Gulf of Mexico may be disrupted by Tropical Storm Fay.

Analysts said the weather was being monitored. Royal Dutch Shell removed about 360 workers from the region over the weekend as a precaution.

US light, sweet crude fell 42 cents to $113.35 a barrel while London Brent crude lost 46 cents cents to $112.09.

The dollar weakening slightly also supported oil prices, observers said.

In addition, supply worries lifted the oil price – which had fallen to as low as $111 on Friday.

BP said that exports of Azeri oil by rail to Georgia had stopped because of “damage” to a railway line caused during the military conflict between Russia and Georgia.

The line, which runs from the Georgian capital of Tbilisi through the city of Gori before heading to the ports of Batumi and Poti, carries between 50,000 and 70,000 barrels of Azeri oil per day.

Softer demand

The euro and pound both strengthened slightly against the dollar on Monday after the greenback had enjoyed a strong rally last week.

The falling dollar tends to push oil prices up as investors buy into crude and other commodities as a hedge against inflation.

Oil prices are still well off the peak of $147 a barrel hit in July.

Last week’s forecast by the Opec cartel of oil producing nations that demand would grow more slowly than previously thought in 2008 and 2009 also helped to prevent prices from rising .

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The price of oil has fallen after government figures showed a sharp slowdown in US demand.

Light sweet oil fell to $112.31 a barrel, its lowest in more than three months, before settling at $113.01.

Energy Information Administration data showed US demand for oil in the first half of 2008 saw its sharpest drop in 26 years, compared to a year before.

Oil prices have fallen from record highs of more than $147 in July, as the economy has slowed.

The Energy Information Administration (IEA) said that US demand for oil fell 800,000 barrels per day for the first six months of this year, compared to the same period a year earlier.

The IEA predicts that US oil demand next year will be at its lowest since 2003, at 20.08m barrels per day on “prospects of a weak economy and continuing high crude oil prices”.

The latest figures showed that while US demand dropped sharply, non-industrialised nations saw demand rise by 1.3m barrels per day for the first half of 2008.

Commenting on the data, Kyle Cooper, an analyst with IAF Advisors, said: “It takes a lot of bullish arguments away, but $113 is still not cheap.”

Separately on Tuesday, a plan between Russia and Georgia to end fighting between the two nations eased concerns that supplies in the region could be disrupted.

Though Georgia is not an oil producer, key crude and gas exports are transported through it.

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The price of crude oil has retreated slightly after hitting record highs above $142 a barrel, amid concerns that supply will not meet demand.

In London, Brent crude was trading at $140.16, having earlier hit $142.13.

New York light crude had climbed as high as $142.26 a barrel, but later fell back to $140.34.

Producers’ group Opec has been under pressure to boost production, though recent reports have shown its members are split over whether to lift output.

Libya has threatened to cut production because the market is well supplied.

Libyan threats

Libya’s most senior oil official, Shokri Ghanem, said on Thursday he was looking into the possibility of cutting production in response to US threats against oil producers.

Analysts blame the price of crude on a variety of factors from basic supply and demand to hedge funds.

Opec has said speculators have played a part in the oil spike this year, but others are not convinced.

“We believe the factors driving oil prices higher are fundamental and not speculative,” Deutsche Bank said in a research note.

“Oil needs to rise to $150 a barrel for oil as a share of global Goss Domestic Produce to reach the levels that occurred in the early 1980s,” according to the bank.

But tensions between oil consumers and producers are rising.

The US House of Representatives has passed a bill that would allow the Justice Department to sue Opec members for limiting supplies.

But the bill has yet to be backed by the Senate and the White House has already said it would veto the bill.

There was also scepticism about whether there will actually be a cut in Libya, because of soaring prices.

“I doubt that any real effort in cutting output would be forthcoming, considering that pricing continues to hit new records,” said Victor Shum, an analyst at Purvin & Getz.

‘Radically new level’

Meanwhile, the chief executive of Gazprom, Alexei Miller, has been talking down the influence of Opec.

Saying that Opec had no real impact on prices, he told the Financial Times: “Not a single decision has been passed of late that would really influence the global oil market.”

He also said that the world was undergoing “a great surge in oil and gas prices, which will end with prices at a radically new level”.

Mr Miller predicted that Gazprom would become the most influential company in the energy business.

On Friday, the firm approved the replacement of former chairman Dmitry Medvedev, who is now Russian president, with former prime minister Viktor Zubkov.

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The US and the four largest economies in Asia are to voice “serious concerns” over “unprecedented” oil prices.

Energy ministers are meeting in Japan a day after a record one-day jump in the crude oil price, to $139 a barrel.

Under pressure from the US, Japan, China, India and South Korea have agreed on the need to end fuel subsidies, blamed for boosting demand.

But correspondents say there are major differences over the speed and extent to which the changes should be made.

The soaring cost of oil is causing growing strain to economies around the world, with some governments facing protests and other pressures from consumers and businesses.

Both the Indian and Malaysian governments have recently raised fuel prices in order to cut the subsidies they provide.

Officials and ministers from the Group of Eight (G8) key industrialised nations, as well as China, India and South Korea, are meeting for two days in the northern city of Aomori.

In a statement to be issued after the talks, the US and Asian countries are expected to say rising oil prices pose a great burden, especially on developing countries and are “against the interest of both consuming and producing countries”, news agencies reported.

It will also say that “phased and gradual” withdrawal of price subsidies – blamed by some for fuelling demand in emerging economies – is “desirable”, the French news agency AFP said.

But India insisted there was no agreement to remove the subsidies altogether, China made clear it had no time frame for moving towards lower subsidies, and Japan’s trade minister confirmed they had agreed only on the need to remove the subsidies, according to the BBC’s Chris Hogg, in Tokyo.

‘Economic egotism’

Friday’s spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

“Russia is a global player. We understand our responsibility for the fate of the world and want to participate in forming the rules of the game” Dmitry Medvedev, Russian president

On Saturday, US energy secretary Samuel Bodman said the price surge was a “shock” but not a crisis, amid fears the oil price spike could help tip some of the world’s economies into recession.

He also said he did not see a need for a tightening of regulation of oil markets.

Some say market speculation, and a lack of disclosure of information over the size and nature of reserves, may be stoking the price rises, as well as concerns that demand may be growing faster than supply.

Separately, Russian President Dmitry Medvedev blamed what he termed the US’s “economic egotism” for the current problems in the global economy.

He accused the US of “aggressive financial policies” and said most people in the world had become poorer.

Speaking at the St Petersburg International Economic Forum, he said Russia was a “global player” and wished to “participate in forming new rules of the game”, but not because of “imperial ambitions”.

Iran threat

On Friday light crude set a record high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

The benchmark light, sweet crude oil is more than twice the price it was a year ago.

On Friday, the market was also responding to a statement by Israel’s transport minister that an attack on Iran was “unavoidable” after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Correspondents say fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters, as well as Israeli threats to strike Iran over its nuclear programme.

Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market.

News reported by BBC