Oil at $70 as cyclone nears Mideast Gulf

By Jane Merriman and Janet McBride

LONDON (Reuters) - Oil surged above $70 on Monday on news a cyclone was headed toward the oil-producing Arabian peninsula with the potential to disrupt shipping and output.

Top exporter Saudi Arabia said it expected its oil facilities to escape unscathed from the gathering storm. Fellow OPEC member the United Arab Emirates also appeared to be outside the path of the storm, a shipping agent said.

Minor oil producer Oman put its army and police on high alert, however, and warned the population of very high waves when winds of up to 205 km (127 miles) per hour reached land.

London Brent crude, currently seen as a better gauge of the global market than U.S. oil, was up $1.33 cents at $70.40 at 2:30 p.m. EDT, off a session high of $70.63.

U.S. crude settled up $1.13 cents at $66.21.

"Prices have turned around on news of a major tropical storm that has the potential to interrupt oil shipments from the Gulf," said Addison Armstrong of TFS Energy Futures in the United States.

Oman produces just 715,000 barrels per day of oil, a small fraction of Saudi Arabia's almost 9 million bpd.

Earlier in the day, oil prices had drawn continued support from output disruptions in Nigeria that have tightened supplies of gasoline-rich crude during peak summer demand.