Crude Oil Leaps as Wilma Threatens Gulf of Mexico

WASHINGTON – Oil jumped nearly 3 percent on Monday as another tropical storm gathered strength in the Caribbean, menacing U.S. rigs and refineries already rocked by the most active hurricane season in decades.

Tropical Storm Wilma (search), the 21st named storm this year, could become a hurricane on National Hurricane Center (search) said.

The last time there were so many named storms was 1933. Vulnerable oil platforms and refineries along the Gulf of Mexico (search) have already battled an onslaught from two major hurricanes, and six plants are still completely shut.

Rising tensions in Iran, the world's fourth-biggest oil producer, also buoyed prices after twin bombings in the southwest oil city of Ahvaz, which Tehran blamed on Britain.

U.S. crude settled at $64.36 a barrel, up $1.73 or 2.8 percent. London Brent crude settled at $60.57 a barrel, up $1.09. Prices have fallen from a late August high above $70 but are still close to levels unseen in real terms in a quarter of a century.

Talk of waning demand evaporated Monday when the U.S. hurricane center upgraded Tropical Depression 24 to Tropical Storm Wilma.

The pattern of the storm was likely to be erratic for the next day or two, the NHC said on its Web site (http://www.nhc.noaa.gov/).

"It certainly could have an impact on the production and refineries that are up and running today and it certainly would have an impact on the recovery," ConocoPhillips (NYSE:COP - news) Chairman Jim Mulva told Reuters.

Hurricanes Katrina and Rita tore through the Gulf and into the coast in August and September, sharply curtailing oil and gas production as well as refinery operations.

"In the present situation this storm is bound to keep the market on edge," said Kevin Norrish, an analyst at Barclays Capital.

Norrish said prices of refined products, like gasoline and heating oil, would be particularly sensitive if the storm hit.

As of Monday, more than 66 percent of U.S. oil production from the region was shut while nearly 10 percent of U.S. refining capacity, or 1.63 million barrels per day, was also idle.

"The pinch point is product output," Norrish said.

Geopolitical anxiety moved up a notch in OPEC-member Iran, where five people were killed and more than 80 wounded when homemade bombs detonated in garbage bins Saturday.

"We are very suspicious about the role of British forces in perpetrating such terrorist acts," the ISNA student news agency quoted Iranian President Mahmoud Ahmadinejad as saying.

Britain, which has more than 8,000 troops across the border in southern Iraq, has denied any link with the bombs or with a string of attacks this year in Khuzestan province, the center of Iran's oil industry. But the incident has increased tensions.

Oil traders have been on tenterhooks over Iran since the summer as Tehran's persistent pursuit of its nuclear program puts it at odds with the United States.

Dealers are also watchful for signs that record energy costs are beginning to eat into economic growth or felling inflation, factors that could undermine the market's demand-driven rally.

OPEC trimmed its forecast for 2005 world oil demand growth Monday, blaming oil prices that are up 50 percent this year. The cartel predicted demand growth would quicken again in 2006.

Figures from Germany showed that Europe's biggest heating oil market has historically low stocks heading into winter.

"Market sentiment is very fickle," said Michael Wittner, global head of energy market research at Calyon Corporate and Investment Bank, part of Credit Agricole Group.

"There is a tug-of-war between the argument that weakening demand will lead to softer prices and the argument that refinery outages are going to cause upward pressure on prices through the fourth quarter."