Fears of storm’s effects lead to rise in oil prices

NEW YORK (AP) — Oil prices climbed for a third day Wednesday as fears deepened that Tropical Storm Gustav could enter the Gulf of Mexico as a powerful hurricane and disrupt oil and natural gas production.

On its current trajectory, Gustav could also damage fuel refineries along the vulnerable Gulf Coast and push gasoline prices higher at the pump in time for Labor Day weekend.

Light, sweet crude for October delivery rose $1.88 to settle at $118.15 a barrel on the New York Mercantile Exchange after earlier spiking as high as $119.63. Crude has tacked more than $3 onto its price since Friday as worries over Gustav at least temporarily halt oil’s steep, monthlong slide from July’s record price above $147 a barrel.

Royal Dutch Shell PLC said it’s evacuating some 300 workers from offshore Gulf rigs, while BP PLC was also removing personnel from the region that’s home to about a quarter of U.S. crude production and much of its natural gas.

Though it was too soon to know where the storm would hit, some models showed Gustav taking a path toward Louisiana and other Gulf states devastated by Hurricanes Katrina and Rita three years ago in a double blow that sent energy prices soaring.

One business weather research firm predicted as much as 80 percent of the Gulf’s oil and gas production could be shut down as a precaution if Gustav enters the region as a major storm.

“A bad storm churning in the Gulf could be a nightmare scenario. We might see oil prices spike $5 to $8 if it really rips into platforms,” said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

The storm also boosted natural gas prices, which gained 11.6 cents to settle at $8.394 per 1,000 cubic feet.