OIL prices swung higher yesterday as Hurricane Gustav struck Haiti, raising concerns that the storm could slam into major oil operations in the Gulf of Mexico.

However, the price rise was tempered by a stronger dollar and a report from the Energy Department showing even slower fuel demand than many traders thought.

After dropping as low as US$112.36 per barrel in overnight trading, light, sweet crude for October delivery ended the day up US$1.16 to settle at US$116.27 a barrel on the New York Mercantile Exchange.

If Gustav continues along a path toward the Gulf, it could mean an uptick in gas station prices ahead of Labor Day weekend.

James Cordier, president of Tampa, Fla-based trading firms Liberty Trading Group and OptionSellers.com, said he expects pump prices to edge up about 10 cents between now and Labor Day as refiners add a hurricane premium to wholesale prices.

"Everything about this looks like a strong storm that would evacuate platforms," Cordier said.

The average US retail price for gasoline yesterday was US$3.672, according to auto club AAA, Oil Price Information Service and Wright Express. That is down about a penny from Monday, and down nearly 11 percent from the record US$4.114 reached July 17, just a few days after crude hit an all-time high above US$147 a barrel.

Tropical Storm Gustav became a Category 1 hurricane early yesterday as it approached Haiti's southern coast, then slammed into the island nation later in the day. The Miami-based National Hurricane Center said Gustav could gather strength over the Gulf's warmer-than-usual waters.