Oil rises 1% to $117 on storm fears

Oil rose more than $1 to $117 a barrel on Friday, as energy companies prepared for Tropical Storm Gustav to deliver what could be the hardest hit to the heart of U.S. offshore production since the devastating 2005 hurricane season.
Crude for October delivery was rose $1.41 or 1.2% to $117 a barrel by 0705 GMT, after rising as high as $117.15 earlier.
That pared Thursday's loss of $2.56, triggered by a pledge from the U.S. government and the International Energy Agency to release emergency stockpiles if Tropical Storm Gustav disrupted U.S. oil production.
London Brent crude rose $1.35 to $115.52 a barrel.
Tropical Storm Gustav was forecast to strengthen into a hurricane by Friday as it neared the Gulf of Mexico, home to a quarter of U.S. crude oil production and 15% of its natural gas output.
Gustav was 35 miles west-southwest of Kingston, Jamaica, at 11 p.m. EDT.
For a graphic showing Gustav's trajectory, please click on: https://customers.reuters.com/d/graphics/gustav.jpg
Forecasters said the storm could intensify rapidly and "it would be no surprise" if Gustav within 72 hours became a Category 4 or 5 hurricane, the most severe on the hurricane intensity scale.
Electronic trading was relatively calm ahead of the U.S. Labor Day holiday on Monday, when NYMEX floor trading will be closed. Electronic trading on Globex will not be affected.
"Amid thin trading, it is a given never to find yourself in short positions," said Akira Kamiyama, derivatives trader at Mitsui & Co.
Oil companies were preparing platforms for the storm, expected to enter the Gulf as a major hurricane on Sunday and possibly reach catastrophic strength.
Shell Oil Co, the largest producer in the Gulf of Mexico, said on Thursday it expects to shut all of its Gulf of Mexico production over the next two days as it evacuates workers from offshore platforms.
Anadarko Petroleum Corp said it expects to shut all its production, including the Independence Hub, the largest offshore natural gas processing facility, by Sunday.
Forecaster Planalytics said any damage to offshore platforms would not be long lasting, after predicting on Wednesday that up to 85% of the Gulf's oil and natural gas production could be shut in by Gustav.
Further support came after UK newspaper The Daily Telegraph reported on Friday that the Russian government had told at least one of its oil companies to prepare for a possible cut in shipments to Europe in days in response to threatened sanctions, citing a single unidentified source.
"If this (news) were fully taken into account, oil should be up by more than $1," said Makoto Takeda, energy analyst at Bansei Securities in Tokyo. "The market is responding calmly. I don't think the market is seriously picturing that such a big sanction as reported is on the horizon."
As Gustav churned through the Caribbean, Tropical Storm Hanna formed in the Atlantic Ocean, on a path that could threaten the Bahamas and Florida, the U.S. National Hurricane Center said.
The dollar retreated against a basket of currencies on Friday as some investors booked profits on the greenback's rise a day earlier on data showing the U.S. economy had grown at a faster pace than initially thought during the second quarter.
Traders were also eyeing an OPEC meeting scheduled for September 9 in Vienna, as well as escalating tensions between Russia and Georgia.
OPEC could cut output at a meeting in September but will most likely maintain current production levels, Venezuela's Oil Minister Rafael Ramirez said on Thursday.