American's deficit through May was below last year's figure – thanks to strong growth in revenues, the U.S. Treasury Department said yesterday.

Through the first eight months of the budget year, the deficit totaled $227 billion, down 16.7 percent from the same period in 2005, when the red ink totaled $272.3 billion.

The positive trend so far this year came about even though the deficit in May was up from a year ago, climbing to $42.8 billion, 20.9 percent higher than the deficit in May 2005.

Analysts blamed the May deficit drop to timing issues that shifted payments for benefit programs . Last year those payments had been made in April or June.

The $227 billion total deficit for the past eight months puts the U.S. government on track to turn in a substantially smaller deficit this year than last year, when the red ink totaled $319 billion for the full year, the third-highest amount of red ink in dollar terms. The record deficit was $413 billion set in 2004.

The Congressional Budget Office is forecasting that this year's deficit will be around $300 billion, significantly below a previous estimate of $350 billion, reflecting significant increases in tax revenues.

Through the first eight months of the current budget year, which began on October 1, government revenues have totaled $1.545 trillion, up 12.9 percent from a year ago.

Government spending is also up but at a slower pace, rising by 8 percent to $1.772 trillion, compared to the same eight months in the 2005 budget year.

In other key economic news from the U.S., crude oil futures fell by more than $1 a barrel as the first named storm of the Atlantic hurricane season was expected to steer clear of the Gulf of Mexico's petroleum infrastructure. Light trading volume exacerbated the move, analysts said.

But oil prices stayed above $70 a barrel and analysts said the longer-term direction of the market remains murky.

"It has really been trendless over the past few weeks. There are lots of cross-currents," said Man Financial broker Andrew Lebow, noting how concerns about geopolitics are being offset by global economic worries.

Alaron Trading analyst Phil Flynn said energy traders are having a difficult time sorting through mixed signals on inflation, U.S. gas demand and the U.N.'s diplomatic standoff with Iran.

"Until there's more clarity, there will be continued volatility," he said.

While tensions in the Middle East underpin high world oil prices, there was also a measure of relief yesterday that Iran had accepted some parts of a Western offer aimed at getting the country to halt its nuclear program.

At the same time, the head of the U.N. atomic watchdog agency told a 35-nation meeting he had made little progress in his probe of suspicious aspects of Iran's nuclear program.

Light sweet crude for July delivery declined by $1.27 to settle at $70.36 a barrel on the New York Mercantile Ex-change, where gas futures fell by 2.85 cents to settle at $2.1243 a gallon.

July Brent crude on London's ICE Futures settled $1.55 lower at $68.93 a barrel.

Hurricane Alberto was expected to reach Florida this morning. Authorities issued a hurricane warning and called for evacuations along Flor-ida's Gulf Coast.

Analysts said they expected little if any Gulf of Mexico production to be shut in.

Still, geopolitical worries will keep a floor under oil prices, said Victor Shum, an energy analyst based in with Purvin & Gertz. "The market's aware that the Iranian issue is not going to be resolved quickly," he said.