Oil rose above $114 a barrel yesterday on worries of a potential supply threat from Tropical storm Fay to oil and gas production in the Gulf of Mexico.
Shell and Marathon have pulled non-essential workers from the eastern and central Gulf of Mexico due to the storm threat, but offshore production was unaffected, the companies said on Sunday.
US crude was up 31 cents to $114.01 a barrel by 1005 GMT, but off an intra-day high of $115.35. It settled down $1.24 at $113.77l on Friday, after dipping to $111.34, the lowest since May 1. London Brent crude rose 33 cents to $112.88.
"Oil was strong earlier because of the storm," said Christopher Bellew, broker at Bache Financial. "If the storm proves not to be so serious to the oil industry then it's quite likely we will see the market continue to retreat," he said.
Fay was expected to avoid most of the offshore production areas in the Gulf and instead strike the Gulf Coast of Florida today or tomorrow, the US National Hurricane Centre forecast.
Some computer models, however, predict Fay may enter eastern Gulf of production areas before making landfall on the coast of Alabama or Mississippi.
Supply concerns in other regions also added support for the market.
BP said exports of Azeri oil by rail to Georgia had stopped due to "damage" to a railway line in Georgia.
Crude has fallen sharply since reaching an all-time high of $147.27 a barrel on July 11, as growing global economic problems and high fuel prices weigh on demand. Storms routinely disrupt tanker traffic and production in the region in the North Atlantic hurricane season.