Oil nears $119 on storm fears

TOKYO (Reuters) - Oil rose for a fourth straight day to stay above $118 a barrel on Thursday, on fears Tropical Storm Gustav may hit the Gulf of Mexico after it morphs into a major hurricane, paralysing the heart of U.S. offshore production.

Crude for October delivery was trading up 79 cents at $118.94 a barrel by 5:15 a.m. British time, after settling up $1.88 on Wednesday. Oil has risen $3.56 in the past three sessions.

London Brent crude was up 85 cents at $117.07 a barrel.

Gustav is expected to hit the U.S. Gulf Coast around Monday as the first major hurricane to threaten U.S. energy installations there since Katrina and Rita in 2005.

AccuWeather said Gustav could strengthen into a Category 4 or 5 storm over the Gulf -- home to a quarter of U.S. crude oil production and 15 percent of the nation's natural gas output.

Shell Oil Co, the U.S. Gulf of Mexico's largest producer, said its oil production would be affected as early as Thursday as it evacuated all workers from offshore operations. Gustav could shut down 85 percent of U.S. production platforms in the Gulf, private forecaster Planalytics said.

"This is the time of the year that (hurricane) premiums can be put into the market, $10 to $15 a barrel," said Peter McGuire, managing director of Commodity Warrants Australia. "(There is the) Labour Day holiday on Monday, and the market will be shut. There's a lot of nervousness in the market."

McGuire said oil could hit around $130 over the next week and a half on hurricane worries. Oil was last at that level five weeks ago.

Analysts say U.S. companies could be forced to draw on oil inventories to compensate for disruptions.