"Global oil prices have dropped, because there are fears that fewer people will travel by air. But we don't know how long this situation will last," said Withaya Wangchitrarak, executive vice president of PTT for retail business.

He said that due to the lower crude-oil prices, domestic marketing fees for all fuel products have increased to 60 satang per litre, still below the expected level of Bt1 per litre.

Following the drop in oil prices in Singapore, Bangchak Petroleum Plc yesterday announced a 40-satang-per-litre reduction on gasoline and gasohol, and a 10-satang reduction on diesel.

Bangchak senior executive vice president Manoon Siriwan said he believed the drop in global oil prices would be temporary.

"There are a number of factors, including the fighting between Israel and Lebanon and other political issues, that could push prices back up," Manoon said.

Crude oil prices on the New York Mercantile Exchange fell more than US$1 (Bt37.4) a barrel on Thursday.

However, in London, crude oil prices rose yesterday after dropping more than $2 a barrel a day earlier, as markets reconsidered expectations of lower jet fuel demand and weaker consumer confidence due to the thwarted transatlantic aeroplane attacks.

Markets also took note of the monthly report from the International Energy Agency (IEA), which cut its global oil-demand growth estimate due to shrinking demand in developed industrialised nations - but with China offsetting much of the impact.

Light, sweet crude for September delivery was up 70 cents at $74.70 in electronic trading on the New York Mercantile Exchange. September Brent on the ICE Futures exchange was also up 70 cents, at $75.98.

Thursday's price drop of more than 3 per cent - to the lowest settlement price since July 28 - came after British authorities said they had stopped a terrorist plot to blow up several aircraft in flight between Britain and the US.

Lawrence Eagles, head of the IEA's oil-industry-and-markets division, said that the report hadn't factored in the potential impact of the airline terror plot.

"It's far too early to make a definitive call on this," Eagles said. It will be important to gauge the psychological impact, he said, and "if it does cause a reduction in air travel, it'll impact on [jet fuel], which is the tightest part of the product spectrum."

According to the IEA report, estimated world oil-product demand is flat at 84.8 million barrels per day (bpd) this year and the market has a fragile cushion to absorb supply disruptions in Alaska and elsewhere.

"For the time being, the market can cope with current outages," the IEA said in its monthly review of the oil market.

"But in the light of the many possible threats to output, including the current hurricane season, there is little doubt that the upstream spare capacity cushion remains thin."

The impact of disruption to supplies from the BP field in Prudhoe Bay, Alaska, would probably be substantially less than the 400,000 bpd reported because of offsetting factors elsewhere.

The agency said that Chinese demand might grow faster than expected, and it raised its forecast of oil-product demand from China this year by 24,000 bpd to 7.1 million bpd, an increase of 6.5 per cent on the 2005 figure.