NEW YORK Crude oil prices finished modestly higher Monday, but only after seesawing wildly as nervous traders watched the Hurricane Ike approach the Gulf's oil facilities.
Ike, after scouring the Bahamas and Haiti, made landfall on Cuba as a Category 3 storm. The hurricane was downgraded, but still packed sustained winds close to 100 mph. It is expected to regain its strength and enter the Gulf of Mexico later this week.
"The main driver today and through the rest of this week will be Hurricane Ike. The market is going to zig and zag in response to each development," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
The dollar also complicated energy trading as it rebounded against other major currencies, encouraging investors who bought commodities to hedge against a weaker U.S. currency to sell them.
"When the dollar moves north or south, it has a dramatic effect on commodities across the board," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Meanwhile, the Organization of Petroleum Exporting Countries' upcoming meeting in Vienna, Austria, continued to weigh on traders' minds. OPEC oil ministers will be deciding whether to trim production in a bid to stall oil's recent slide. Iranian oil minister Gholam Hossein Nozari said he thinks there is too much crude on the market, but some analysts say they believe Saudi Arabia will try to thwart calls to cut production.
Minister of Energy Mohammed Bin Dhaen al-Hamli, who will lead the United Arab Emirates delegation, said that inventory levels indicate that "the market is well supplied," and that "the recent decline in prices simply shows that the oil price had risen too high and too fast."
Light, sweet crude for October delivery rose 11 cents to settle at $105.86 a barrel on the New York Mercantile Exchange, after rising as high as $109.89 a barrel and falling as low as $104.70.
Crude has plunged more than $40, or 27 percent, since surging to a record $147.27 a barrel on July 11. The drop has helped lower the retail price of gasoline for U.S. drivers. The average cost of a gallon of gasoline was $3.658 on Monday, down from $3.665 a day earlier and down from the record $4.114 on July 17.
In other Nymex trading Monday, gasoline futures rose 6.42 cents to settle at $2.7503 a gallon; heating oil futures rose 3.03 cents to settle at $3.0131 a gallon; and natural gas gained 7.8 cents to settle at $7.527 per 1,000 cubic feet.
Nearly 80 percent of U.S. oil production and a little over 64 percent of natural gas production in the Gulf remained halted Monday following evacuations in preparation for Hurricane Gustav, the U.S. Minerals Management Service said.
Forecasters say Ike could hit land over the weekend near the Texas-Louisiana border, perhaps close to Houston.
"It wouldn't take much to get crude back up to $111, $112 this week if the storm comes into the Houston region or elsewhere," Ritterbusch said.
Accuweather.com said it expects the storm to strengthen again before moving over the Florida Keys by Tuesday.
Ike's advance left rig operators questioning whether to resume work. Royal Dutch Shell said it would keep staffing at its offshore Gulf installations to a minimum.
"Companies are caught between restarting production after Gustav and making preparations for Ike," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "These storms are very unpredictable, but Ike's likely movement puts it into the Gulf area."
In 2005, Hurricanes Katrina and Rita ravaged the Gulf of Mexico, inflicting damage on oil and natural gas facilities in the region that took several months to repair.
On London's ICE Futures exchange, October Brent crude finished lower, dropping 65 cents to settle at $103.44 a barrel.The dollar rose against such currencies as the euro and the pound after the U.S. Treasury said it was taking over the mortgage giants Fannie Mae and Freddie Mac.
Associated Press Writer Alex Kennedy in Singapore and AP Business Writer Adam Schreck in Dubai, United Arab Emirates, contributed to this report.