Oil drops to six-month low in Ike aftermath

NEW YORK (Reuters) - U.S. oil prices dropped more than $2 to a six-month low below $99 a barrel on Sunday as dealers bet on a swift recovery of the nation's energy production after Hurricane Ike and the U.S. government loaned oil to two refiners.

The losses add to a steady downtrend in oil prices since mid-July's peak of over $147 a barrel amid mounting evidence that high energy costs and a weakening economy are cutting deeply into fuel consumption.

Oil prices CLc1 fell $2.38 to $98.80 a barrel by 2150 GMT (5:50 ET) after falling as low as $98.46 -- the lowest since February 26.

The New York Mercantile Exchange opened a special energy trading session on Sunday due to increased trader interest about Hurricane Ike, which slammed into the Houston energy hub Saturday leaving a quarter of U.S. oil and refined fuel production idled and millions without power.

Early reports from emergency officials and oil companies indicated little or no severe damage to infrastructure -- signaling a possible quick recovery to production in the coming days.

"The oil market is selling off because the early indications show Ike didn't do as much damage as feared," said Chris Jarvis, senior analyst at Caprock Risk Management. "That said, this sell-off could prove to be a bit premature, since it could be a while before things get back to normal."

The U.S. Coast Guard said it had received reports of damage to offshore facilities in the Gulf of Mexico, but added details were still not available.

The U.S. government said on Sunday it loaned a total of 309,000 barrels of strategic crude to two oil refiners having trouble procuring supplies in the storm's wake, ConocoPhillips and Placid Oil.

The International Energy Agency said it was in touch with the U.S. government over whether a larger release of emergency stockpiles to the open market was required.

Even as oil prices fell Sunday, gasoline prices at the U.S. pumps shot up more than six cents to nearly $3.80 a gallon, adding to a five cent increase on Sunday, as retail fuel supply concerns mounted in Ike's wake.

"It may not be possible for us -- and other manufacturers -- to maintain normal supplies in the coming days," Chevron Corp (CVX.N) said in a statement.

Twelve of the 15 shuttered Gulf Coast refineries showed no visible signs of damage or flooding after Ike , but fewer than half of them appeared to have power, according to a Reuters eyewitness.

(Reporting by Richard Valdmanis; Editing by Andre Grenon)