August 26, 2008 / 7:58 AM / in 9 years

Oil rises as Gustav churns toward US Gulf

NEW YORK (Reuters) - Oil rose on Tuesday as Hurricane Gustav took aim at U.S. oil and natural gas installations in the Gulf of Mexico as it churned through the Caribbean.

<p>Venezuela's President Hugo Chavez takes a sample of crude during his weekly broadcast at a nationalized oil field at Orinoco's belt in the southern strip of the eastern Orinoco River February 17, 2008. REUTERS/Miraflores Palace/Handout</p>

Weather models showed Gustav either entering the Gulf -- home to a quarter of U.S. oil production and 15 percent of natural gas output -- by early Sunday or veering toward Mexico’s Yucatan Peninsula.

“All of the oil platforms off Texas and Louisiana will probably be at risk, but that’s real long-range,” Eric Wilhelm, a senior meteorologist at AccuWeather Inc, told Reuters, adding that Gustav could hit the Gulf of Mexico as a Category 3 hurricane.

U.S. crude rose 30 cents to $115.41 a barrel by 12:41 p.m. EDT. London Brent crude traded down 7 cents to $113.96 a barrel.

Gustav, a Category 1 hurricane, strengthened slightly in the central Caribbean as it spun toward southwestern Haiti early Tuesday, the U.S. National Hurricane Center said.

Royal Dutch Shell Plc RDSa.L, one of the top producers in the region, said it would begin evacuating nonessential workers from offshore rigs on Wednesday.

Other companies were also monitoring the storm.

Hurricanes Katrina and Rita devastated oil and natural gas production and refining facilities in the region in 2005, sending prices to then-record highs.

The storm helped stem oil’s slide from a record above $147 a barrel hit in July, as mounting economic problems in consumer nations threaten demand.

U.S. oil demand for June was 5.6 percent below year-ago, the U.S. Energy Information Administration reported on Tuesday, as high fuel prices and the wider economic crisis battered motorists in the world’s top consumer.

Germany’s gross domestic product contracted by 0.5 percentage points in the April-June period, the first contraction since 2004 and raising concerns Europe’s biggest economy could be headed for a recession.

Further support for prices on Tuesday came from escalating tensions between the West and Russia over Georgia.

Russia recognized two rebel regions of Georgia -- South Ossetia and Abkhazia -- as independent states on Tuesday, escalating tension in the volatile Caucasus and putting Moscow on a collision course with the West.

While the conflict has disrupted Azeri oil shipments through Georgia, analysts said this latest development was having little influence on oil prices so far.

Reporting by Osamu Tsukimori and James Topham in Tokyo; Alex Lawler and Santosh Menon in London, editing by Matthew Lewis

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