* Oil retreats after touching $120 on fears of storm
Gustav's impact
* Gustav strengthens, projected to hit U.S. Gulf coast early
next week
* IEA to release stocks if needed
(Adds IEA, updates prices)
By Jane Merriman
LONDON, Aug 28 (Reuters) - Oil fell back on Thursday, from
above $120 a barrel, after the International Energy Agency
pledged to help out with additional supply if Tropical Storm
Gustav damages U.S. oil installations in the Gulf of Mexico.
The storm is forecast to reach hurricane status as it
approaches the Gulf of Mexico, home to a quarter of U.S. crude
oil production and 15 percent of its natural gas output.
U.S. crude oil for October delivery <CLc1> was down 15 cents
at $118.00 a barrel by 1503 GMT. It reached an intraday high of
$120.50 a barrel.
London Brent crude <LCOc1> was up 3 cents at $116.25 a
barrel.
The International Energy Agency has said it is ready to
release strategic oil stocks if needed. The agency, adviser on
energy issues to 27 industrialised countries, released oil
product stocks in 2005 after Hurricane Katrina. []
"The impact of Gustav could now be assuaged by this
intervention," said Christopher Bellew, of Bache Commodities
Limited.
Gustav is forecast to hit the U.S. Gulf Coast around Monday
and will be the first major hurricane to threaten U.S. energy
installations since hurricanes Katrina and Rita in 2005.
"The impact of Gustav on the downstream sector could be felt
more acutely -- at least in the short term -- as there is no
U.S. government inventory that can be released," said Thomas
Stenvoll, energy strategist at UBS, said in a research note.
EVACUATION
The storm strengthened on Thursday as it headed towards
Jamaica and was expected to regain hurricane status later in the
day, the U.S. National Hurricane Center said.
The weather system currently has winds of up to 70 miles an
hour, just shy of the 74 mph required for a Category One
hurricane.
Shell Oil Co, <RDSa.L> the U.S. Gulf of Mexico's largest
producer, said output would be affected as early as Thursday as
it evacuated all workers from offshore operations. []
"(There is the U.S.) Labour Day holiday on Monday, and the
market will be shut. There's a lot of nervousness," said Peter
McGuire, managing director of Commodity Warrants Australia.
Oil has fallen more than $30 a barrel from its record peak
of $147.27 reached on July 11. But the threat of Gustav has
helped prices to regain some lost ground.
The market surged to record highs this year in response to a
string of bullish factors, including a weak U.S. dollar,
expectations of a tighter supply/demand balance long term and
political tensions over Iran.
The dollar has strengthened, but initially slipped from a
six-month high against the euro on Thursday after comments by
European Central Bank officials the previous day dampened
speculation about a cut in euro zone interest rates. []
The U.S. currency then moved higher, which contributed to
the pull-back in oil.
(Additional reporting by Osamu Tsukimori in Tokyo; editing by
Anthony Barker)
