Oil prices tumbled to below US$111 a barrel on Monday as weather forecasters said Hurricane Gustav was weakening as it advanced towards Louisiana.

A stronger dollar also helped to reverse the course for oil prices.Still, precautions due to Gustav prompted companies to shut down drilling and refining operations in the Gulf Coast region.

By late afternoon in Europe, light, sweet crude for October delivery was down US$4.70 to US$110.76 a barrel in electronic trading on the New York Mercantile Exchange.

Earlier in the session, it had reached a high of US$118.25 before retreating.

On Friday, the contract fell 13 cents to settle at US$115.46 a barrel.

In London, October Brent crude was down US$4.32 to US$109.73 a barrel on the ICE Futures exchange. Trading in the US was closed Monday for Labor Day celebrations.

"There's no question the drilling platforms in the Gulf of Mexico and the big refineries between Houston and New Orleans are in the path of this hurricane," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "There's likely to be some damage. We could see an extended period of disruption."

Subdued response

Some analysts, however, said the market's response to Gustav was not as strong as some predicted. United States energy risk management firm Cameron Hanover described reaction as "extremely subdued".

"The best reasons we can give for that are the strength of the US dollar, the continuing decline in consumer demand and the market's recent trend lower," a Cameron Hanover report said. "The reaction is telling us that this market just does not have the stomach it once did for higher prices."

Current crude supplies in the United States were "ample due to higher imports from the North Sea," said analysts at JBC Energy in Vienna, Austria, another possible reason for the lack of a rally in oil prices.

Oil companies were shutting down productions and evacuating facilities ahead of the storm. Exxon Mobil Corp, Royal Dutch Shell PLC and Valero Energy Corp, North America's largest refiner, were among the companies that said they had shut down Gulf Coast refineries, primarily in south Louisiana.

Altogether, about 2.4 million barrels of refining capacity had been halted, roughly 15 per cent of the nation's total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. The US Gulf Coast is home to nearly half the nation's refining capacity.