Oil up on hurricane threat

NEW YORK - Crude oil rose more than $1 a barrel yesterday as forecasts showed Hurricane Gustav might enter the Gulf of Mexico, home to more than a fifth of US oil production.

"Prices surged because Gustav appears to be strengthening as it moves toward the Gulf," Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York, said yesterday. "The news from Georgia is also helping send prices higher."

Russia, the world's second-biggest oil producer, recognized the independence of two breakaway regions in Georgia yesterday. German Chancellor Angela Merkel said the decision breaches international law and will not be accepted by European Union members.

Crude oil for October delivery rose $1.16, or 1 percent, to settle at $116.27 a barrel on the New York Mercantile Exchange.

Gasoline for September delivery climbed 8.74 cents, or 3 percent, to settle at $2.97 a gallon in New York.

Pump prices haven't risen since July 19, according to AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 0.9 cent to $3.67 a gallon, AAA said yesterday on its website.