VIENNA, Austria -- Oil prices rose Friday as markets worried about potential storm damage in the Gulf of Mexico and a refinery fire, and cheered a better performance by stock markets in the U.S. and Europe.
Authorities in Nigeria also imposed a dusk-to-dawn curfew Friday in the southern state where security forces and gang members have clashed. The fighting has concentrated in Port Harcourt, the oil region's largest city, which is in Rivers State.
Light, sweet crude for September delivery on the New York Mercantile Exchange rose $1.18 to $72.18 a barrel in electronic trading by afternoon in Europe.
On Thursday, the contract had fallen $2.33 to settle at $71 a barrel as investors worried about the cooling U.S. economy, troubled credit markets and volatile stock markets.
Stock markets in the United States and Europe got a lift Friday after the Federal Reserve cut its discount rate by a half point to 5.75 percent, declaring that "downside risks" to the economy have increased appreciably.
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The Dow Jones industrials soared more than 300 points in early trading in New York. The United Kingdom's benchmark FTSE 100 index surged 3.4 percent, and Germany's DAX index gained 2.7 percent.
October Brent on London's ICE Futures exchange gained 90 cents to $70.67 a barrel.
"The concerns over the U.S. housing markets and credit markets have caused some liquidation in crude oil futures and that's the key reason for the recent fall in crude oil pricing," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Beyond prices that make buying relatively attractive, Vienna's PVM Oil Associates noted other factors driving up the market.
Hurricane Dean "could cross the Gulf of Mexico and seriously damage the oil infrastructure there," said PVM. Additionally, fire damage to two crude units at the Pascagoula refinery in Mississippi, Chevron's largest U.S. refinery, left "unclear when full operations can be resumed," said PVM.
Shum also said the fire — and concerns about the hurricane — could drive up prices.
"Refineries in all key markets such as the U.S., Asia and Western Europe are fully utilized, and so any hiccup in the global refining system such as a fire would cause some temporary tightness in the product market so that would support strong pricing," he said.
Along with the hurricane, markets were monitoring Tropical Depression Erin, which was downgraded from tropical storm status after making landfall in Texas early Thursday morning.
Erin appeared to spare most Gulf Coast oil and gas infrastructure. Valero Energy Corp. said operations were not affected at its Corpus Christi, Texas, refinery. Updated forecasts continued to call for Dean to pass to the south of the Gulf, making landfall on Mexico's Yucatan peninsula.
Heating oil futures added more than 3 cents to fetch $2.0165 a gallon while gasoline futures gained nearly 4 cents, selling for $2.017 a gallon.
Natural gas rose 16.9 cents to $7.044 per 1,000 cubic feet.
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