Crude rises for a third day to cross $118

New York: Oil prices shot up above $118 a barrel yesterday, rising for a third day as Tropical Storm Gustav spun towards the Gulf of Mexico on a possible collision course with offshore oil and gas platforms.

Also yesterday, the Energy Department reported a surprise drop in US crude supplies. However, the report did not seem to be affecting trading as oil investors focused their attention on Gustav.

Evacuations

Royal Dutch Shell said it has begun evacuating some 300 workers from offshore rigs in the Gulf, home to about a quarter of US crude production and much of its natural gas. Any damage to oil infrastructure or refineries along the coast could send US pump prices up, possibly before the busy Labor Day weekend.

Light, sweet crude for October delivery rose $2.34 to $118.61 a barrel in morning trading on the New York Mercantile Exchange, after earlier rising as high as $119.63. The contract added $1.16 on Tuesday to settle at $116.27 a barrel.

In London, October Brent crude added $2.04 to $116.67 a barrel.