SINGAPORE (AFP) — Oil prices rebounded slightly in Asian trade Tuesday after overnight losses following the downgrade of Hurricane Ernesto to a tropical storm, dealers said.

The slight price rise reflected traders’ concerns that Ernesto could regain strength and hit vital U.S. energy installations in the Gulf of Mexico, they said.

At 4:00 pm (0800 GMT), New York’s main contract, light sweet crude for delivery in October, was up four cents at 70.65 dollars a barrel from its close of 70.61 dollars in the United States where it had dropped 1.90 dollars.

Brent North Sea crude for October shed one cent to 70.81 dollars.

“So going forward, we can expect a lot of volatility ... the market will continue to react to the storm news,” said Victor Shum, a Singapore-based analyst with U.S. energy consultancy Purvin and Gertz.

Hurricane Ernesto was downgraded to a tropical storm Sunday, easing immediate fears that vital U.S. oil installations in the Gulf of Mexico area would be hit.

Projections by the National Hurricane Center suggest the tropical storm would slam ashore near Miami late Tuesday or early Wednesday, head back out to the Atlantic a few hours later and barrel ashore again in South Carolina.

By the time it reaches South Carolina, the storm could have regained the strength it had reached on Sunday when it became this year’s first hurricane before losing some of its power.

There have already been mass evacuations in Cuba while authorities in Florida have warned residents to prepare for trouble.

The dispute over Iran’s nuclear program is also a source of concern given the threat of UN sanctions against a major oil exporter.

“I think the market expects the Iranian issue to drag on for a long time and it will provide a floor to prices,” Shum said.

In line with a UN Security Council resolution, the United States ands its European allies are insisting that Iran must stop enriching uranium by August 31 or face the threat of sanctions.

Iran underscored Sunday its determination to produce nuclear fuel but said it still sought talks on Western concerns about its nuclear program and confirmed that UN chief Kofi Annan was due in Tehran on Saturday.

Iran is the world’s fourth-largest crude producer, pumping about 4.0 million barrels of oil per day, most of which is exported.