Gustav Weakens to Tropical Storm, Heads Toward Cuba

By Brian K. Sullivan and Aaron Sheldrick

Aug. 27 (Bloomberg) -- Hurricane Gustav weakened to a tropical storm after crossing Haiti yesterday, leaving at least five people dead, and headed for open water where it may pick up strength and threaten oil production in the Gulf of Mexico.

Gustav's sustained winds fell to 60 miles (100 kilometers) per hour, down from 90 mph yesterday, the U.S. National Hurricane Center said in an advisory at 2 a.m. Miami time today. The storm's eye was over the western coast of Haiti about 80 miles west of the Haitian capital, Port-au-Prince, and was heading west-northwest at 5 mph.

``Gustav could regain hurricane strength later today or tomorrow,'' the weather agency said. ``More significant strengthening is forecast on Thursday.''

The storm is expected to move into waters west of Haiti and head across the Caribbean Sea toward southern Cuba where hurricane warnings are in effect. The hurricane center's longer- term forecast predicts Gustav will enter the Gulf by Aug. 31. The storm may threaten U.S. oil production next week, private forecasters say.

``The entire Gulf is under the gun from Gustav,'' said Jim Rouiller, a senior energy meteorologist with Planalytics Inc., a forecaster based in Wayne, Pennsylvania, whose clients include oil companies. ``Gustav represents a real and potentially dangerous storm for the entire Gulf energy production region.''

Hurricane Warning

A hurricane warning was in effect for southeastern Cuba. The storm may bring as much as 20 inches (51 centimeters) of rain to Haiti, Dominican Republic, Jamaica and Cuba, the Hurricane Center said. Five people in Haiti died yesterday in a landslide caused by the hurricane, Agence France-Presse reported, citing the country's civil protection office.

Gustav has the potential to strengthen to a category 4 storm with winds of at least 131 miles per hour by the time it enters the Gulf, Rouiller said. The area is home to about one- fifth of all U.S. oil production and about 14 percent of natural gas output.

Development into a category 5 storm is possible, said Steve Gregory, senior risk analyst for private forecaster WeatherIntel Services in Chicago. Hurricanes are rated on the 5-step Saffir- Simpson scale, with categories 3 or higher deemed ``major'' storms with winds of more than 111 mph.

In August and September 2005, U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita shut refineries and platforms as they struck the Gulf coast. Oil rose to about $70 a barrel at the end of August that year, touching a record high and up from about $60 a month earlier.

Oil Futures Up

Katrina closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the hurricanes.

Crude oil for October delivery rose as much as 85 cents, or 0.7 percent, to $117.12 a barrel on the New York Mercantile Exchange. It was trading at $116.77 at 1:08 p.m. Singapore time. Prices are up 62 percent from a year ago.

Royal Dutch Shell Plc may start evacuating non-essential staff from the Gulf of Mexico as early as tomorrow, spokeswoman Destin Singleton said in an e-mail.

Transocean Inc., the world's largest offshore oil driller, suspended operations at a rig ``as a precaution in case they need to evacuate or take other action,'' Guy Cantwell, a spokesman for Houston-based Transocean, said yesterday in an interview.

``The latest odds have gone up significantly that it will track across the producing areas,'' Gregory said.

The storm may be poised to strike New Orleans or Houston next week, Rouiller said. Based on current information, Gustav will most likely make landfall in Louisiana just west of New Orleans, Gregory said.

Coastal Gas Threatened

``What is really critical is, that is natural gas country,'' Gregory said by telephone. ``A lot of the natural gas pulled from the Gulf is off Louisiana.''

Three areas of low pressure are following Gustav in the Atlantic, marking the start of what will probably be an active three-week period, he said.

``Gustav is the forerunner of what could become a very nasty hurricane season for the U.S.,'' Rouiller said.

The hurricane comes on the heels of Tropical Storm Fay, which last week left a trail of death and flooding in the Caribbean and Florida, where it made an unprecedented four landfalls.

Gustav is the seventh named storm of the Atlantic hurricane season, which runs from June 1 through Nov. 30. The National Oceanic and Atmospheric Administration's forecasters predict 14 to 18 named storms will develop this year.

To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net; Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.