In late morning trading on 4 September, the price of West Texas Intermediate oil was $109.20 on the New York Mercantile Exchange, a fall of about $10 on the previous week and a 25 per cent drop on the all-time record of $147.27 set on 11 July.

Investment bank Barclays Capital says it is too early, however, to underestimate the overall impact of summer storms, with about 13 million barrels of downstream production and 5 million barrels of upstream production already affected.

“With more hurricanes [including] Hanna, Ike and Josephine making their way towards the US, possibilities of further disruption to production remains significant,” says the bank.

With the oil price continuing to drop, the bank predicts that Opec, which holds its next production meeting in Vienna on 9 September, looks more likely to cut output in the coming months.

It follows comments made by Iran’s Opec governor on 2 September that the group may need to cut the amount oil supplied by as much as 1.5 million barrels-a-day (b/d) to balance global markets by early 2009.

Mohammad-Ali Khatibi says the first half of that reduction should come solely from a cut in Saudi Arabia’s output given the kingdom is producing more than 1 million b/d more today than it was a year ago.

“Venezuela and Iran have reiterated that they view $100 as the minimum justifiable price for oil, though Opec’s most influential member Saudi Arabia is yet to state what outcome it would like to see from next week’s meeting,” says Barclays Capital.