Oil rises as tropical storm forms in Caribbean

Mon Aug 25, 2008 4:22pm EDT
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By Matthew Robinson

NEW YORK (Reuters) - Oil rose on Monday as Tropical Storm Gustav formed in the Caribbean, stirring concerns that it could disrupt oil and natural gas output in the Gulf of Mexico as it moves northwest.

Gustav, the seventh tropical storm in the Caribbean this season, was expected to strengthen and bring hurricane conditions to parts of the Dominican Republic and Haiti within 24 hours.

U.S. crude settled up 52 cents at $115.11 a barrel after falling more than 5.4 percent on Friday in the largest one-day slide since December 27, 2004. Brent crude gained 11 cents to settle at $114.03 a barrel.

Two of seven forecast tracks show the storm heading toward the Gulf of Mexico, where the United States has a high concentration of oil and natural gas production. Four show it heading toward Guatemala, Belize or the Yucatan Peninsula.

Packing winds near 60 mph as of 2 p.m. EDT, Gustav could strengthen into a hurricane prior to moving over land, the U.S. National Hurricane Center said.

The storm was located about 225 miles south-southeast of Port au Prince, Haiti, moving northwest near 14 mph on Monday afternoon.

"The session was lackluster and was looking for direction when news of the upgrade of Gustav came in and all of a sudden prices rose," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

Further support on Monday came from ongoing tension between the West and Russia over Georgia and expectations that oil exporter group OPEC, which meets on September 9, could trim production should prices fall further.   Continued...