DUBAI, United Arab Emirates - Oil prices rose above $109 a barrel Monday as Hurricane Ike took aim at the Gulf of Mexico, delaying efforts to bring oil and gas production back online, and Iran's oil minister said he thinks there is too much crude on the market.
The week's early gains came as OPEC oil ministers gathered in Vienna, Austria, to decide whether to trim production in a bid to stall oil's recent slide, which has seen prices tumble more than 25 percent from their July high.
Light, sweet crude for October delivery rose $2.80 to $109.03 a barrel in electronic trading on the New York Mercantile Exchange by early afternoon in Dubai. The contract fell Friday by $1.66 to settle at $106.23.
Traders were keeping a close watch on the movement of Hurricane Ike, which bore down on Cuba as it made its way to the Gulf of Mexico.
Nearly 80 percent of U.S. oil production and 70 percent of natural gas production in the Gulf remained halted Sunday following evacuations in preparation for Hurricane Gustav, according to the U.S. Minerals Management Service.
"It is still too early to celebrate the passing of Gustav, as Hurricane Ike could reach the Gulf of Mexico by the end of this week," analysts at Vienna-based JBC Energy said in a note to investors.
Ike's advance left rig operators questioning whether to resume production.
By 8 a.m. EDT, the storm was a Category 2 hurricane with sustained winds near 100 mph and higher gusts, located about 20 miles south of Camaguey, Cuba, according to the U.S. National Weather Service.
Royal Dutch Shell said it would keep staffing at its offshore Gulf installations, which it reduced ahead of Gustav last week, to a minimum as it monitors Ike.
"Companies are caught between restarting production after Gustav and making preparations for Ike," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "These storms are very unpredictable, but Ike's likely movement puts it into the Gulf area."
Investors are also waiting to see what action the Organization of Petroleum Exporting Countries might take at its next meeting Tuesday. Some members have indicated the cartel may take action to defend the US$100 a barrel level.
Iran's oil minister, Gholam Hossein Nozari, said Monday that there is too much crude on the market, adding that OPEC is reviewing whether supply exceeds demand before deciding whether to cut back production. The country, OPEC's second-biggest oil producer, has been the most vocal in saying the group should stem global supply.
Saudi Arabia, the body's largest producer and de facto policy maker, could scuttle any cutback plans, however.
"There are indications that the Saudis will hold firm and resist calls by the cartel's hawks to cut quotas," MF Global analyst Edward Meir said in a research note. "We suspect that an unchanged OPEC stance will take more of a toll on prices, assuming Ike is out of the way with no major damage left in its wake."
Crude has plunged about $38, or 26 percent, since surging to a record $147.27 a barrel on July 11.
In other Nymex trading, heating oil futures rose 10.82 cents to $3.091 a gallon, while gasoline futures jumped 12.62 cents to $2.8123 a gallon. Natural gas for October delivery gained 11.3 cents to $7.562 per 1,000 cubic feet.
In London, October Brent crude rose $1.25 to $105.35 a barrel on the ICE Futures exchange.