Oil rises on hurricane threat, awaits OPEC

OPEC ministers gathering in Vienna were expected to leave formal production targets unchanged as Ike threatened U.S. offshore oil installations still recovering from Hurricane Gustav last week.

U.S. crude was $2.01 higher at $108.24 a barrel by 1323 GMT, after hitting a five-month low on Friday on weaker demand from the United States and other developed economies.

London's Brent crude futures last traded $1.25 higher at $105.34. All trading on the Intercontinental Exchange, including Brent, was suspended due to problems with the trading system.

The exchange aimed to resume full trading at 1335 GMT.

"Whilst observing the goings on in Vienna over the next few days, keep one eye on Hurricane Ike," Robert Laughlin with MF Global said.

Ike weakened into a Category 2 storm on Monday after roaring ashore in northeastern Cuba, but was expected to strengthen into a dangerous Category 3 hurricane when it enters the Gulf of Mexico, home to a quarter of U.S. oil production and 15 percent of natural gas output.

Preparations for Ike have stalled recovery efforts after Gustav, which shuttered oil production and refineries in the region as it barrelled onshore.

OPEC
OPEC ministers were widely expected to leave formal targets unchanged when they meet late on Tuesday as Ike gave prices a lift following a two-month drop that has sent crude down from record highs over $147 a barrel.

"I don't believe there is any possibility we will change production levels," Ecuador's Oil Minister Galo Chiriboga told reporters on Sunday.
Some ministers argue the market is amply supplied following months of overproduction led by Saudi Arabia.

"I believe that the market is oversupplied," Iranian Oil Minister Gholamhossein Nozari told reporters on arrival in Vienna early on Monday.
Officials from Saudi Arabia, the world's top exporter, have not yet arrived in Vienna to comment on output policy.

The head of the International Energy Agency, the adviser to 27 industrialised countries, said on Monday OPEC should maintain output at current levels to help bring down oil prices.

High fuel prices and the wider economic crisis have clipped demand in the United States, sending prices down nearly 30 percent over two months after surging demand from China and other developing economies sent crude on a six-year rally.

Hopes that a U.S. bailout of top mortgage lenders Fannie Mae and Freddie Mac would help temper an economic downturn also provided some support to the oil market.