Sept. 1 (Bloomberg) -- Crude oil fell, reversing earlier gains, on a forecast that Hurricane Gustav is unlikely to intensify in the Gulf of Mexico before striking land.

Category 3 Hurricane Gustav, the most powerful system to hit the region since Rita and Katrina in 2005, is unlikely to accelerate before hitting the coast later today, the National Hurricane Center in Miami said in its latest advisory.

``There's going to be a lot of volatility and uncertainty until the market gets some solid information on where Gustav will strike and how intense the damage will be,'' said Stanislav Nazarati, an independent oil trader in Tallinn, Estonia.

Crude oil for October delivery fell as much as $1.42, or 1.2 percent, to $114.04 a barrel in electronic trading on the New York Mercantile Exchange, trading for $114.09 at 12 p.m. London time. It earlier rose as much as $2.54, or 2.2 percent, to $118 a barrel.

Gulf Coast refineries have cut at least 1.56 million barrels a day of production, about 9.8 percent of the U.S. total. Still, Gustav is two categories below the strength reached by Hurricane Katrina, which sent oil prices to records after wrecking refineries around New Orleans three years ago.

Workers from more than 70 percent of the platforms and rigs in the Gulf have been evacuated as the storm approaches, the U.S. Minerals Management Service said in a statement on its Web site yesterday. About 1.25 million barrels a day of oil and 6.09 billion cubic feet of gas have been shut, or more than 96 percent of offshore oil output and 82 percent of gas production.

The Gulf of Mexico normally produces about 1.3 million barrels of oil and an estimated 7.4 billion cubic feet of gas a day, according to the Minerals Management Service, part of the U.S. Interior Department.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net;

Last Updated: September 1, 2008 07:02 EDT