* Oil gains as Tropical Storm Dolly threatens Gulf of Mexico
* Talks between Iran and major powers inconclusive
(Updates storm details in graph 3, Mexico port shut-in)
By Matthew Robinson
NEW YORK, July 21 (Reuters) - Oil rose on Monday as Tropical
Storm Dolly barreled into the Gulf of Mexico, stoking concerns of
disruptions to U.S. offshore oil and gas production.
U.S. crude <CLc1> settled up $2.16 at $131.04 a barrel after
concerns about U.S. demand knocked prices from record highs over
$147 a barrel last week. London Brent crude <LCOc1> rose $2.42 to
settle at $132.61 a barrel.
The storm, with sustained winds of nearly 50 mph (85 kph),
emerged from the Yucatan Peninsula over the warm waters of the Gulf
of Mexico, and could reach hurricane strength on Tuesday.
The U.S. Energy Information Administration said on its current
path, Dolly was likely to miss major oil producing areas but could
threaten some coastal refineries later in the week. []
Shell Oil Co <RDSa.L> began flying workers from offshore
platforms as a precaution, while many other oil companies with
installations in the Gulf of Mexico said they were closely watching
the storm.
The U.S. Mineral Management Service said four production
platforms and one drilling rig had been shut, but that no output had
been affected yet. []
"Although direct impact on oil infrastructure is expected to be
limited, there is the possibility of precautionary rig evacuations,"
said Jim Ritterbusch, president of Ritterbusch & Associates.
In 2005, hurricanes Katrina and Rita ripped through the Gulf of
Mexico -- home to a quarter of U.S. oil production and around 15
percent of natural gas output -- shutting offshore rigs and coastal
refineries.
The oil exporting port of Cayo Arcas in Mexico, a top U.S.
supplier, was closed on Monday but it was not immediately clear if
it was linked to the storm. []
Further support came from ongoing tensions between the West and
Iran over Tehran's nuclear program, which the West fears could be
used to make nuclear weapons.
Major powers on Saturday gave Iran two weeks to answer calls to
rein in its nuclear program or face tougher sanctions after talks
ended in a stalemate despite unprecedented U.S. participation.
U.S. Secretary of State Condoleezza Rice warned Iran on Monday
that it faced more sanctions if it defied the two-week deadline.
[]
Concerns that the standoff could lead to a disruption of oil
supplies from the OPEC nation have supported crude in its climb to
new highs this month.
"With the weekend discussions regarding Iran's nuclear program
apparently resulting in another stalemate amid a two-week timeline
capable of forcing fresh U.N. sanctions, a renewed injection of risk
premium could characterize much of this week's trade," said
Ritterbusch.
Surging demand from emerging economies in Asia have fueled a
sixfold rise in oil prices since 2002, but concerns over flagging
demand in the United States and other large consumers have helped
temper gains.
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks fell by 500,000 barrels
last week. U.S. gasoline inventories were forecast to have fallen by
100,000 barrels, with distillate stocks seen up 2.2 million barrels.
[]
(Additional reporting by Gene Ramos in New York, Jane Merriman and
Peter Graff in London and Fayen Wong in Perth; Editing by Marguerita
Choy)
