Crude Oil Steady After Tropical Storm Gustav Forms in Caribbean

By Mark Shenk

Aug. 26 (Bloomberg) -- Crude oil was little changed after rising yesterday as Tropical Storm Gustav formed in the Caribbean Sea, raising concern it may threaten oil fields in the Gulf of Mexico.

Gustav packed winds of about 60 miles (96 kilometers) an hour and was moving toward the Gulf, a National Hurricane Center advisory showed at 5 p.m. New York time. Prices also rose after Russian lawmakers voted to recognize the independence of two breakaway Georgian regions, increasing the prospect of new tensions in the area.

``We picked up about a buck on the announcement that Gustav had become a tropical storm,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut.

Crude for October delivery rose 49 cents to $115.60 a barrel at 8:30 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 67 percent from a year ago. Yesterday, futures gained 52 cents, or 0.5 percent, to settle at $115.11.

Brent crude oil for October settlement rose 11 cents to $114.03 a barrel on London's ICE Futures Europe exchange yesterday. Trading hours weren't affected by yesterday's U.K. bank holiday.

Gustav was located about 225 miles (362 kilometers) south- southeast of Port-au-Prince, Haiti, and was moving northwest at about 14 miles an hour, according to the Hurricane Center. Fields in the Gulf of Mexico account for about 20 percent of U.S. oil output.

`Big Moves'

Both houses of Russia's Parliament voted to recognize the independence of South Ossetia and Abkhazia, the two regions that sparked Russia's first foreign incursion since the Soviet era. The Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, resumed oil flows.

``We've already seen some big moves on very little news because trading is so light,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``There's a holiday in London and a lot of people are taking the week off here ahead of Labor Day. We will be keeping an eye on Georgia, the dollar and weather for signs of market direction.''

U.S. markets will be shut on Sept. 1 because of the Labor Day holiday, which is the end of the so-called driving season, when gasoline demand peaks.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.