Crude oil prices dived below $113 a barrel in volatile trading in London and New York yesterday, as Tropical Storm Fay swirled toward the east coast of Florida, veering away from oil installations in the Gulf of Mexico.

Crude oil prices dived below $113 a barrel in volatile trading in London and New York yesterday, as Tropical Storm Fay swirled toward the east coast of Florida, veering away from oil installations in the Gulf of Mexico.

US light, sweet crude for September delivery fell 90 cents to settle at $112.87 on the New York Mercantile Exchange, after earlier rising as high as $115.35. The contract fell $1.24 on Friday to $113.77 a barrel, about $35, or 24%, lower than its trading record of $147.27, set on July 11.

In London, North Sea Brent crude for October delivery fell 61 cents to $111.94 a barrel. .

Fay, the sixth named storm of the 2008 Atlantic season, was passing over western Cuba en route to the Florida Keys after leaving at least five people dead in Haiti and the Dominican Republic. The storm is expected to near hurricane strength as it approaches the Keys but does not currently pose a threat to oil platforms in the Gulf, forecasters said.

Royal Dutch Shell said it airlifted 425 workers from the region as a precaution but said it will redeploy them if the storm remains on its current track. So far during this year's hurricane season in the Atlantic Ocean, no storm has significantly damaged oil installations in the Gulf.

A slightly weaker dollar kept oil prices from slipping further. A falling dollar typically pushes oil prices higher as investors buy crude and other commodities as hedges against inflation.

Still, analysts said that if the dollar's rising trend continued in coming months, it likely would limit gains in oil prices.

A forecast from the Organisation of the Petroleum Exporting Countries on Friday of lower global growth in oil demand helped to keep prices from rising higher.

In its monthly oil report, the producers' cartel forecast world appetite for oil this year would grow by one million barrels a day, a reduction of 30,000 barrels a day from its previous forecast for demand growth for 2008. It also said growth for 2009 will be 900,000 barrels a day, which it said would be the lowest growth in world demand since 2002.

Demand growth from the major industrialised countries will actually slide, Opec said, with non-Organisation for Economic Co-operation and Development countries accounting for all oil demand growth next year.

Elsewhere, news was mixed. Reports that oil flows in the Baku-Tbilisi-Ceyhan pipeline in Turkey could resume soon and the announced start of the withdrawal of Russian troops from Georgia were among the factors keeping oil prices subdued.

However, BP said it has stopped using a railway line that exports Azeri oil through Georgia, following reports of damage to the line.

The closing of the railway line that runs from the Georgian capital of Tbilisi through the city of Gori before splitting in three to head to the ports of Batumi and Poti on the Black Sea and a third location near the Turkish border, further limits BP's options to export Caspian oil through the troubled region.

BP spokesman Toby Odone confirmed that exports had stopped on the line, which can carry between 50,000 and 70,000 barrels of Azeri oil to Batumi per day.

Georgian officials accused Russia of blowing up a key railway bridge on the line on Saturday, severing the country's main east-west rail route. Officials later vowed to restore the link within a week.

The problems on the railway line compound BP's decision last week to shut down its Baku-Supsa oil pipeline - which runs through the centre of Georgia from Baku in Azerbaijan to Supsa on Georgia's Black Sea coast - because of security concerns.

BP has not indicated when it might restart the Baku-Supsa line, which had only reopened a few weeks ago after 18 months of inaction.

It has the capacity to pump up to 150,000 barrels a day, but has recently been pumping around 90,000 barrels a day.

On the currency markets, meanwhile, the pound slipped against the euro and hovered near a two-year low against the dollar, after weak UK housing figures provided more evidence of a struggling domestic economy that might require a cut in interest rates. Sterling suffered an 11-day losing streak against the greenback through Friday, after the Bank of England's gloomy economic outlook in its quarterly inflation report last week cranked up speculation for a cut in base rates that stand at 5%.

Sterling has lost roughly 6% against the greenback this month, and is near an 11-and-a-half-year low on a trade-weighted basis on the view that a rate cut will trim the pound's rate advantage against other currencies, reducing the appeal of UK investments and keeping the currency weak.