Oil prices bounced up a dollar (€0.828) a barrel yesterday after a two-week slide, as dealers eyed a new flare-up of tropical activity in the Caribbean that could threaten the oil-rich Gulf of Mexico.

The revaluation of China's yuan currency on Thursday was also deemed supportive of prices for the short term by strengthening the oil-thirsty nation's purchasing power.

US light sweet crude oil futures gained $1.12 to $58.25 a barrel, but were still well below their all-time high of $62.10 on July 7. London Brent crude rose $1.26 to $56.98 a barrel.

Prices fell 89 cents on Thursday, when dealers focused on a US government report showing robust US oil stockpiles. The second set of blasts in London in as many weeks on Thursday also raised security concerns and worries about the impact on economic growth in the region.

"It stifles tourism," said Sam Tilley, head of research at brokerage Sucden UK Ltd.

Tropical Storm Franklin, the sixth named storm of the Atlantic hurricane season, formed over the Bahamas but was moving northwest and was not expected to hit the US coast.

But a new tropical wave was brewing over the northwestern Caribbean Sea and adjacent land areas. The National Hurricane Center in Miami was tracking it.

It said early on Friday the system was expected to move west-northwest during the next day or two and will bring heavy rainfall to Mexico's Yucatan Peninsula and to nearby countries up to western Cuba.

"Some gradual development of this system is possible thereafter, when it is expected to emerge into the Gulf of Mexico."

Since June, the start of the Atlantic hurricane season, storms have shut just over six million barrels of US crude and 28 bcf of US gas production from the Gulf of Mexico, according to government figures.- (Reuters)