Oil surges to near $109 on hurricane threat

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Crude oil to remain in $50-100 range: FitchOil surges to near $109 on hurricane threatOil drops to USD 106.38 a barrelOil pauses at $109 on demand concerns

Oil jumped than $2 to near $109 a barrel on Monday, rebounding from a five-month low on worries that Hurricane Ike would tear through the Gulf of Mexico, and on hopes that a US bailout of its top mortgage lenders would help temper an economic downturn.

Expectations that the Organisation of the Petroleum Exporting Countries (OPEC) ministers would leave agreed output targets unchanged at a meeting on Tuesday also lent support to prices that had slumped 10 per cent over the past six sessions.

US light crude for October delivery rose $2.49, or over 2.3 per cent, to $108.72 by 0105 GMT, snapping a losing streak that knocked prices to their lowest since April after last week's Hurricane Gustav left most Gulf oil and gas facilities intact.

London Brent crude rose $2.21 to $106.30. Hurricane Ike weakened to a Category 3 hurricane as it bore down on Cuba on Sunday, but was expected to retain strength, entering the Gulf of Mexico as a severe Category 4 storm, a US Federal Emergency Management Agency official said.

It may threaten Gulf energy rigs that account for a quarter of US oil output and 15 per cent of natural gas production. Nearly 80 per cent of the Gulf's oil production remains shut in following Hurricane Gustav, and Ike's approach has forced Shell Oil Co. to stop returning workers to its platforms.

"There is a concern these storms could impact refineries and production more significantly than Gustav did and we might see more buying when London opens as investors cover themselves in case of damage," said Gerard Rigby, analyst at Fuel First Consulting in Sydney.

He said the US government's weekend move to bail out mortgage finance companies Fannie Mae and Freddie Mac also lent support, raising hopes that the latest effort to prop up the ailing housing market would help quell the credit market crisis that has pushed economies toward recession.

A meeting of OPEC on Tuesday could support prices, but many analysts said it was unlikely that the producers' group would cut output to shore up oil prices.

"I don't think there will be any change from the meeting. There might be a lot of talk, especially from Venezuela, about production cuts, but I don't think we will see any," Rigby said.