LONDON, Aug 28: Oil prices dropped sharply on Thursday on profit-taking but were expected to rebound as Tropical Storm Gustav moved across the Gulf of Mexico towards oil and gas facilities, traders said.

Oil prices rose earlier on Thursday on concerns the storm could hit production and rising tensions between Russia and the West over Georgia.

New York’s main contract, light sweet crude for delivery in October, stood at $114.90 per barrel, down $3.25 from Wednesday’s close.

London’s Brent North Sea crude for October shed $2.68 to $113.54, having earlier Thursday spiked above $118.

“I’m sure it’s profit-taking” behind the fall in prices, said Excel Futures president Mark Waggoner, cited by Dow Jones Newswires.

“It’s probably momentary. I think it’s going to run right back up because of” Gustav, he added.

“Oil markets are waiting for Gustav,” said PetroMatrix analyst Olivier Jakob.

“It is still potentially going towards the oil assets of the US Gulf but current forecasts are not showing it to be the mother of all hurricanes.”

The Gulf of Mexico accounts for 26 per cent of US crude production and 11 per cent of natural gas output.

In 2005, hurricanes Katrina and Rita damaged or destroyed about 165 oil platforms of about 4,000 located in the Gulf.—AFP