With the psychological barrier now breached, some analysts said prices could now aim for the once unthinkable $80 a barrel -- a level which economists fear could severely dent consumer demand and curb business activities.

New York's main contract, light sweet crude for delivery in October, touched a high of $70.80 in Asia yesterday morning on news that Katrina was swirling dangerously close to the heart of US production and refining operations around New Orleans.

After the hurricane was down graded a notch lower from a maximum category five storm, at 5:00pm (0900 GMT) the benchmark futures contract was trading at $69.08 a barrel, up $2.95 from its close of $66.13 in the US market Friday.

The price was more than double levels at the end of 2003.

Share markets across Asia and the Pacific tumbled, with dealers saying the cost of crude had struck a level widely seen as a break point -- at which oil costs begin eroding economic growth, weakening currencies, fuelling inflation, and pressuring central banks into raising interest rates.

Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, said the market will await the actual impact of the hurricane on production but he believed 70-dollar oil may not be sustainable because the US summer holidays are now drawing to a close, reducing gasoline demand.

"Seventy dollars is completely far away from the fundamentals," he told AFP. "It's quite difficult to sustain."

But Dariusz Kowalczyk, a Hong Kong-based investment strategist at CFC Seymour Securities, feared that the impact would be longer-lasting as damage to offshore oil rigs and onshore refineries would take time to repair.

Offshore production platforms have been evacuated and refineries onshore shut down ahead of Katrina, one of the most powerful Atlantic hurricanes on record.

The Louisiana port in New Orleans, which handles 11 percent of US crude imports, or one million barrels of oil a day, was on the path of the storm as were refineries in Alabama and Mississippi.

Kowalczyk compared Katrina to Hurricane Ivan which pummelled the US Gulf Coast in September last year, causing widespread damage to the region's oil production infrastructure and leading to a 22 percent rise in prices.

While prices have stabilised after breaching $70 a barrel, "we are still in a very bullish market," he said, adding it was possible prices could even hit $80 a barrel.

"I think it will be a more sustained move higher... There is room for significant volatility in the days ahead," he told AFP.

He pointed out that the February futures contract on the New York Mercantile Exchange has struck $71.87 a barrel -- the highest level for any contract and an indication of where the prices could go.

Gasoline prices in particular have shot up three percent from Friday's close -- a worrying trend because of its direct impact on US consumers, he said.