Oil Rises From Five-Month Low as Hurricane Nears Gulf of Mexico

By Mark Shenk

Sept. 8 (Bloomberg) -- Crude oil rose from a five-month low as Hurricane Ike swept across Cuba, delaying the resumption of production of oil production in the Gulf of Mexico.

Royal Dutch Shell Plc evacuated workers from Gulf platforms or kept staff onshore who were moved out of the path of Hurricane Gustav last month. About 80 percent of the region's oil output and 70 percent of its gas production was still shut yesterday, according to the U.S. Minerals Management Service.

``We have a monster storm in the Caribbean,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``The most recent forecasts have clarified the path and strength of Ike. There's a significant potential for damage to oil facilities in the Gulf.''

Crude oil for October delivery rose $2.66, or 2.5 percent, to $108.89 a barrel at 9:05 a.m. on the New York Mercantile Exchange. Prices are up 42 percent from a year ago.

Gasoline for October delivery increased 14.54 cents, or 5.4 percent, to $2.8315 a gallon in New York. Heating oil rose 14.94 cents, or 5 percent, to $3.1322 a gallon.

Oil dropped 8 percent last week to the lowest since April as Hurricane Gustav passed west of New Orleans with less strength than forecast and the euro declined against the U.S. currency, reducing the appeal of dollar-priced commodities.

Gustav shut all the oil production and most of the gas output in the Gulf. Energy producers reported that personnel from 10 rigs have been evacuated in anticipation of Ike, or about 8.3 percent of the 121 rigs operating in the Gulf, as well as workers from 202 production platforms, the Minerals Management Service said today in a statement on its Web site.

Category 2

Ike weakened to Category 2 on the five-step Saffir-Simpson scale of intensity, with sustained winds of 100 miles (155 kilometers) per hour, the U.S. National Hurricane Center said on its Web site at 8 a.m. Miami time. Ike was moving west across Cuba at 14 mph and is forecast to enter the Gulf tomorrow.

Brent crude oil for October settlement rose $1.35, or 1.3 percent, to $105.44 a barrel on London's ICE Futures Europe exchange.

The 13 members of the Organization of Petroleum Exporting Countries, which supply more than 40 percent of the world's oil, probably will keep producing at a near-record pace as $106-a- barrel crude oil squeezes the global economy. The group is meeting tomorrow in Vienna.

``We have to discuss it with our colleagues the ministers, but we don't think there's a requirement for decreasing production,'' Kuwaiti oil minister, Mohammed Al-Olaim, said boarding a flight for Vienna.

Some members including Iran and Venezuela have asked the group to consider output cuts following the 27 percent decline in prices from their record $147.27 a barrel on July 11.

``Most people expect OPEC will take a deep breath tomorrow and wait to make any changes, so attention is focused on the hurricane,'' Lynch said.

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