Oil rose more than $1 to near $117 a barrel on Friday after falling $2.56 in the previous session as energy companies prepared for Tropical Storm Gustav to deliver what could be the hardest hit to the heart of US offshore production since 2005.
Crude for October delivery was trading up $1.16 at $116.75 a barrel by 0245 GMT, after rising more than $1 to as high as $116.89 earlier.
That pared Thursday's loss of $2.56, triggered after the US government and the International Energy Agency pledged to release emergency stockpiles if Tropical Storm Gustav disrupted US oil production.
London Brent crude rose $1.11 to $115.28 a barrel.
Tropical Storm Gustav was forecast to strengthen into a hurricane by Friday as it neared the Gulf of Mexico, home to a quarter of US crude oil production and 15 percent of its natural gas output.
Electronic trading was relatively calm ahead of the US Labour Day holiday on Monday.
"Gustav is expected to become a Category 3 hurricane at the least, and possibly 4 or 5," said Akira Kamiyama, derivatives trader at Mitsui & Co. "Amid thin trading, it is a given never to find yourself in short positions."
Oil companies were preparing platforms for the storm, expected to enter the Gulf as a major hurricane on Sunday and possibly reach catastrophic strength.
Shell Oil Co, the largest producer in the Gulf of Mexico with an average of 370,000 barrel per day of oil equivalent, said it expects to shut all of its Gulf of Mexico production over the next two days as it evacuates workers from offshore platforms.
Anadarko Petroleum Corp said it expects to shut all its production, including the Independence Hub, the largest offshore natural gas processing facility, by Sunday as it evacuates all offshore staff.
Forecaster Planalytics said that any damage to offshore platforms would not be long-lasting, after predicting on Wednesday that up to 85 percent of the Gulf's oil and natural gas production could be shut in by Gustav.
Further support came after UK newspaper The Daily Telegraph reported on Friday that the Russian government had told at least one of its oil companies to prepare for a possible cut in shipments to Europe in days in response to threatened sanctions, citing a single unidentified source.
The dollar held firm against a basket of currencies on Friday, consolidating gains made the previous day on data showing the US economy grew at a faster pace than initially thought during the second quarter.
Opec could cut output at a meeting in September but will most likely maintain current production levels, Venezuela's Oil Minister Rafael Ramirez said on Thursday.
The US Department of Energy said on Thursday the government was ready to release crude oil from the Strategic Petroleum Reserve if Gustav seriously disrupted supplies. The International Energy Agency said member nations were ready to release strategic oil stocks. - Reuters