Oil hits six-week low of $126

By Peter Graff and Alex Lawler

LONDON (Reuters) - Oil fell more than $4 a barrel to a six-week low on Tuesday as a tropical storm moving over the Gulf of Mexico was expected to miss major oil and gas installations.

Tropical Storm Dolly, the first big storm threat of 2008, was still expected to become a hurricane, but was unlikely to have an impact on crude production in North America.

"Barring a veer north, the risks of an oil price disturbing event are low," Citi analysts said in a research note.

Oil prices have fallen more than 14 percent over the past 10 days from a July 11 high of more than $147.

U.S. crude futures for August fell $4.78 to $126.26 a barrel before rebounding slightly to $126.99 by 3:10 p.m. British time. London Brent was off $3.62 at $128.99.

The storm strengthened slightly on Tuesday as it moved over the warm waters of the western Gulf of Mexico towards the Texas-Mexico border, the U.S. National Hurricane Center said in its latest update.

Concerns Dolly could affect oil production had added $3 a barrel the previous session and refineries were still keeping a watch on the weather.

"We have done things like reviewing emergency supplies, backed up computer programs," said Bill Day, spokesman for Valero Energy Corp. about preparations at its 142,000 barrels per day refinery in Corpus Christi.