Aug. 29 (Bloomberg) -- Crude oil headed for its biggest weekly gain in almost two months and natural gas rose as producers evacuated rigs before the arrival of Gustav, forecast to be the largest hurricane in the Gulf of Mexico since Katrina.

Gustav is expected to reach Louisiana next week, passing through a region home to a quarter of U.S. oil output and 14 percent of natural gas production. Oil prices will rise next week if Gustav strikes the central Gulf Coast, according to median of responses in a Bloomberg News survey of analysts.

``If we see some major disruptions from the hurricane upstream or downstream, we could break through and see prices of $130 next week,'' said Andy Sommer, an HSH Nordbank analyst in Hamburg. ``If there is no disruption, we could come back down to $110 again.''

Crude oil for October delivery rose as much as $1.58, or 1.4 percent, to $117.17 a barrel on the New York Mercantile Exchange. It was at $117.03 a barrel at 8:55 a.m. London time. Prices are up 2 percent this week, the biggest gain since rising 3.6 percent in the week of July 4. Oil has dropped 21 percent from a record $147.27 reached on July 11.

Natural gas for October delivery rose as much as 13.9 cents, or 1.8 percent, to $8.189 per million British thermal units on Nymex. It was at $8.150 per million Btus at 8:57 a.m. London time.

The U.S. will be celebrating the Labor Day holiday on Sept. 1 and floor trading on the Nymex will be closed. Traders will still be able to carry out electronic deals.

Near-Hurricane Strength

Oil fell more than $2 a barrel yesterday to $115.59 a barrel after the International Energy Agency said it would tap strategic stockpiles if Gustav disrupts Gulf energy production.

Gustav is packing winds of near-hurricane strength, with sustained winds of 70 miles (110 kilometers) per hour. The storm is about 15 miles west of Kingston, Jamaica, and heading west at 7 mph, the U.S. Hurricane Center said in an advisory at 8 p.m. Miami time. Tropical Storm Hanna formed northeast of the Bahamas yesterday, the center said.

``All the move up is due to Gustav and Hanna,'' Robert Laughlin, senior broker at MF Global Ltd. in London, said of the higher oil price. ``I expect the storm to strike the Gulf of Mexico on Sunday night.''

Gustav has a 70 to 75 percent chance of reaching the Gulf, by which time it is likely be a Category 3 hurricane, according to Weather Insight. A storm of that strength has winds of at least 111 mph and is classified as a ``major'' hurricane.

2005 Damage

The Gulf of Mexico is home to 26 percent of U.S. oil output and 14 percent of the country's gas production. Katrina, which reached Category 5, closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused in 2005 by hurricanes Katrina and Rita.

Brent crude oil for October settlement rose as much as $1.39, or 1.2 percent, to $115.56 a barrel on London's ICE Futures Europe exchange. It was at $115.32 at 8:58 a.m. local time. The contract fell yesterday $2.05, or 1.8 percent, to settle at $114.17 a barrel.

Prices were backed by concerns over increasing tensions between Russia and the West.

Russia may curb oil shipments to Western Europe in retaliation for the threat of European Union sanctions and NATO's naval actions in the Black Sea, the Daily Telegraph reported, without citing anyone.

`Major Concern'

Russian oil companies were ordered by the government to cut supplies to Germany and Poland through the Druzhba pipeline, and executives from OAO Lukoil have been put on alert for the weekend, the London-based newspaper reported.

Supplies may be cut as early as Sept. 1, the newspaper said, citing an unidentified business person. The cut would come at the same time as an emergency EU summit in Brussels to discuss sanctions against Russia, the newspaper said.

``A prolonged cut would be a major concern for the market,'' said Sommer of HSH Nordbank.

Oil price are expected to climb next week as Gustav impacts the Gulf's production facilities.

Eleven of 29 analysts surveyed by Bloomberg News, or 38 percent, said prices will increase through Sept. 5. Nine of the respondents, or 31 percent, said oil will decline and nine said prices will be little changed. Last week 55 percent expected futures to increase.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net.

Last Updated: August 29, 2008 04:28 EDT