Oil drops $4 as Gustav weakens off US Gulf Coast

London: Oil plunged more than $4 on Monday as concerns that Hurricane Gustav would cause severe damage to the US oil sector eased as the storm weakened off the Louisiana coast.

Gustav - which forced the shutdown of nine refineries and most US offshore Gulf of Mexico oil production - weakened to a Category 2 storm as it approached the coast near Port Fourchon, Louisiana, a key logistical port that supports 75 percent of Gulf of Mexico drilling operations.

US crude fell $4.19 to $111.27 a barrel by 1429 GMT as markets discounted the potential damage from the storm, which had earlier been forecast to hit the United States as a Category 4 storm. Trade in the United States was shut due to the U.S. Labor Day holiday.

London Brent crude fell $4.31 to $109.74 a barrel.

"It looks like Gustav is not going to be as strong a storm as the market had feared," said Phil Flynn of Alaron Trading in Chicago. "There is a belief that this storm is not going to do much damage, that we are going to be able to get through this and not miss a beat and continue our downward move."