UPDATE 2-Oil surges $2 to near $109 on hurricane threat

                                
 * Oil rises more than $2.50, first gain in seven sessions
                                
 * Hurricane Ike weakens over Cuba on path toward US Gulf
                                
 * Fannie, Freddie bailed out to help ease credit crisis
                                
 * Traders await OPEC output decision on Tuesday
 (Adds quotes, updates prices)
                                
 PERTH, Sept 8 (Reuters) - 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 U.S. 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 percent over the past six sessions.
                                
 U.S. light crude for October delivery <CLc1> rose $2.49, or
over 2.3 percent, 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 <LCOc1> 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
U.S. Federal Emergency Management Agency official
said.[ID:nN07333010]
                                
 It may threaten Gulf energy rigs that account for a quarter
of U.S. oil output and 15 percent of natural gas production.
Nearly 80 percent 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.
[nN96453803]
                                
 "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 U.S. government's weekend move to bail out
mortgage finance companies Fannie Mae <FNM.M> and Freddie Mac
<FRE.N> 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.
                                
 For more stories on the bail-out click: [nN07463067]
                                
 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. [ID:nL5308673]
                                
 "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.
                                
 OPEC is estimated to be pumping 790,000 barrels per day
(bpd) above the collective ceiling of 29.67 million bpd for its
12 members with output limits, leaving some room for manoeuvre
before it needs to consider any formal cut.
 (Reporting by Fayen Wong, additional reporting by Nick
Trevethan; Editing by Jonathan Leff)