Oil prices slipped to their lowest level in six weeks yesterday as traders expressed relief that a tropical storm in the Caribbean looked unlikely to cause significant disruption to production in the Gulf of Mexico.

The price of a barrel of light sweet crude for delivery in August - the main New York contract - fell $4.63 to $126.41. Earlier it glanced lows of $125.63 - a level last seen in early June before surging to a record $147.50 on July 11. The price of a barrel of Brent crude, the main London contract, also fell to about $127.

Tropical Storm Dolly is expected to reach hurricane status before it hits land near the Texas border with Mexico, but it is no longer expected to hit big oil production areas. ExxonMobil, the world's largest oil company, said that it had closed down 10,000 barrels per day of oil output and 40million cubic feet of natural gas.

Anadarko Petroleum said that it had closed down about 30,000 barrels per day in the Western Gulf. However, that represents only a fraction of the total production from the region, which provides the United States with a quarter of its oil and 15 per cent of its daily gas supplies.

Markets fear a repeat of 2005 when hurricanes Katrina and Rita led to the closure of a quarter of US oil production, sending prices to what were then record highs.

Other producers, including BP, Shell and Chevron, said that they had taken precautionary measures, including moving staff from offshore platforms to safe locations, but had not yet been forced to cut production. Other oil production facilities, including a pipeline operated by Williams Cos, were operating below normal capacity because of the storm.

Andrew Horstead, an energy analyst, said that the storm looked likely to have “minimal impact” on oil production, but the large number of storms so early in the hurricane season represented a worrying trend.

The oil market was continuing to focus on tensions in the Middle East and in particular on talks aimed at encouraging Iran to stop its uranium enrichment programme.

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