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NEW YORK : Oil prices lost steam Friday as traders watched a deadly storm churning toward the Gulf of Mexico, threatening US oil and gas operations.
New York's main contract, light sweet crude for delivery in October, fell 13 cents to close at 115.46 dollars per barrel, reversing early gains.
Brent North Sea crude for October settled later in London, slipping 12 cents to 114.05 dollars.
Prices closed off earlier sharp gains as traders faced a three-day weekend ahead of Monday's Labor Day holiday Monday.
"The coming storm remains the market's primary focus," said Mike Fitzpatrick, analyst at MF Global.
Gustav, which regained hurricane strength Friday was expected to cross Cuba on Saturday and enter the southern Gulf of Mexico on Sunday, the hurricane center said.
"Gustav may hit anywhere between Brownsville, Texas, and the Florida panhandle although most models show landfall on the Louisiana coast, somewhat west of New Orleans, late Monday or early Tuesday as a category-three storm," Fitzpatrick said.
"Needless to say, market participants will spend a very nervous weekend as price action suggests."
Oil prices had closed sharply lower on Thursday as traders discounted the threat of the storm but on Friday, Newedge energy analyst Ken Hasegawa warned: "We (still) have to worry about the hurricane's effect on this market."
Anxiety also grew on the third anniversary of Hurricane Katrina's devastating arrival in the Gulf of Mexico and authorities in New Orleans were planning a possible mandatory evacuation to prevent a repeat of the devastation and deaths wreaked in 2005.
Authorities in Louisiana and Mississippi have already declared states of emergency before Gustav's expected landfall late Monday.
US President George W. Bush on Friday declared a state of emergency in Louisiana, freeing up federal aid.
Several oil companies have evacuated workers from their installations in the Gulf of Mexico, where a quarter of US crude oil is produced.
US officials are prepared to tap the government's strategic oil reserve if Gustav damages oil installations in the Gulf, a Department of Energy spokeswoman said Friday.
"We're standing ready to use every available authority to provide supplies of energy in the event of a disruption," spokeswoman Bethany Shively told AFP.
"The Strategic Petroleum Reserve is a key safeguard that we have to provide protection for the American people during the event of a severe disruption of oil supply," she said.
The reserve currently holds an emergency supply of 707 million barrels of crude oil, she said.
The coordinated effort stands in sharp contrast to the botched response to Katrina, which smashed poorly built levees in New Orleans, destroying tens of thousands of homes and killing nearly 1,500 people in the region.
Meanwhile, the eighth tropical storm of the hurricane season, dubbed Hanna, was churning in the Atlantic Friday.
- AFP /ls
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