NEW YORK (CNN/Money) - Oil prices rose sharply higher on Monday as companies operating in the Gulf of Mexico braced for output disruptions from powerful Hurricane Ivan.
Light crude for October delivery ended up $1.06 to $43.87 a barrel on the New York Mercantile Exchange, while London Brent settled 96 cents higher at $40.75 a barrel.
Ivan, a rare Category 5 hurricane, is expected to cross the western edge of Cuba on Monday and enter the Gulf of Mexico on Tuesday, having veered west from its previous path towards Florida.
The Gulf is home to about a quarter of U.S. oil and gas output. Shell closed 272,000 barrels per day (bpd), and ChevronTexaco and Total said they had also shut some output. Energy companies in the area have taken more than 3,000 workers off drilling rigs as a precaution.
Only as Ivan's northern trajectory develops will the scale of reduced supplies become clearer.
Oil prices have swung widely in recent days and are almost $6 below the all-time peak of $49.40 struck on Aug. 20 for U.S. crude, with dealers nervous over potential supply hiccups as producers pump at close to full tilt.
"Prices are being pulled from pillar to post at the moment, which is all a consequence of a tight market and will continue as long as demand is so strong and supply is struggling to keep up," Daniel Hynes, industry analyst at ANZ Bank in Sydney, told Reuters.
"I can't see the volatility easing any time soon, as long as the supply-demand outlook remains tight," he added.
The Organization of Petroleum Exporting Countries (OPEC) will review policy on Wednesday. Signs were emerging that the cartel might resist calls to raise official output limits to legitimize actual production.
OPEC, which controls more than half of global crude exports, is pumping at least 1.5 million bpd above its existing ceiling of 26 million bpd.
OPEC delegates said on Sunday that concerns were growing among the cartel's 11 members that 25-year high output could lead to a hefty stockbuild in the fourth quarter, when inventories are normally drawn down.
In Iraq, exports on Monday were running at 1.9 million barrels a day, close to normal, uninterrupted on Sunday by one of the worst days of post-war violence.
Saudi Arabia's Oil Minister Ali al-Naimi, speaking in Vienna, said Riyadh was producing 9.5 million bpd, more than one million barrels daily in excess of the official OPEC quota and up 200,000 bpd from earlier this summer.
But he questioned the need to raise official quotas to reflect higher actually supplied output.
"OPEC is now producing two million bpd over the quota. What is the point of raising production? The price is not being affected by production, but by other factors," he said.
A decision to raise quotas by less than a million barrels daily, or perhaps not at all, could be read by traders as a signal that OPEC is preparing to curb excess production, should prices lose another chunk from last month's record high.
For October, the Saudis have allocated 10 percent less than September in supplies to at least one U.S. oil major.
"Last month we had 100 percent of full contractual volumes; this month we are getting 90 percent," a source at the major told Reuters.
-- from staff and wire reports
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