U.S. forecasters said there is a 29 percent chance the storm may strengthen to a hurricane after it enters the Gulf of Mexico, which accounts for more than a quarter of U.S. oil output. Iran risks ``further isolation'' if it doesn't respond in two weeks to the United Nations offer of economic aid in return for halting uranium enrichment, U.S. officials said July 19.
Crude oil for August delivery rose as much as $1.25, or 1 percent, to $130.13 a barrel on the New York Mercantile Exchange. It was at $129.66 at 11:05 a.m. in Singapore.
The contract fell 41 cents, or 0.3 percent, to settle at $128.88 on July 18, the lowest close since June 5. Prices dropped 11 percent last week, the most in more than three years, on signs of slowing global economic growth and faltering U.S. fuel demand.
Iran snubbed Western efforts to get it to suspend nuclear enrichment at international talks in Geneva on July 19, setting the stage for new sanctions if the Islamic republic doesn't respond to an existing proposal in two weeks.
Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, borders the Straits of Hormuz and has in the past threatened to close the waterway carrying about a fifth of the world's oil deliveries.
The UN has already imposed three sets of sanctions on Iran in an attempt to halt nuclear research the U.S. and Israel believe will be used to make weapons.
Brent crude oil for September settlement rose as much as 88 cents, or 0.7 percent, to $131.07 a barrel on London's ICE Futures Europe exchange. It traded at $130.85 at 11:05 a.m. in Singapore.
New York oil prices have gained 35 percent this year as the Iranian dispute added to concerns about supplies from the world's largest producing region. Prices also rose as the falling U.S. dollar, weak global equity markets and supply disruptions in the North Sea and Nigeria encouraged investors to buy the commodity.
The North Atlantic hurricane season runs June through November. September is historically the busiest month for storms and hurricanes.
The northern Gulf of Mexico accounts for about 25 percent of U.S. oil production. Tropical Storm Dolly's projected path over the tip of the Yucatan Peninsula takes it north of Campeche Bay, where Petroleos Mexicanos produces about 1.07 million barrels of oil a day.