Oil prices extend losses as Dolly fears recede

Oil prices fell further on Wednesday as the market expected Hurricane Dolly to avoid energy installations in the Gulf of Mexico, traders said.

The market was also awaiting the latest weekly update on the health of crude stockpiles in the United States, which is the world's biggest consumer of energy. Falling inventories could see prices rebound, they added.

New York's main contract, light sweet crude for September delivery, dropped by 1.57 dollars to 126.85 dollars a barrel in electronic deals. The August contract expired on Tuesday at 127.95 dollars, a long way off its historic high of 147.50 dollars that had been set on July 11.

Also Wednesday in early London trading, Brent North Sea crude for September delivery shed 1.77 dollars to 127.78 dollars.

Hurricane Dolly churned over the Gulf of Mexico on Wednesday towards the US-Mexican border, forcing thousands in Mexico to evacuate their homes as US oil rigs put staff ashore and the US Navy sheltered aircraft.

Packing sustained winds of 130 kilometres (80 miles) per hour, the second hurricane of the season was about 140 kilometres southeast of the Texas border town of Brownsville, the US National Hurricane Center said.

The storm was moving northwest at 15 kmph (nine mph), the centre said at 0600 GMT.

Some oil drilling companies in the area have evacuated personnel from their offshore rigs as a precaution.

The US Department of Energy was meanwhile to publish weekly energy stockpiles data at 1430 GMT.