U.S. crude slipped 60 cents to $114.86 a barrel by 1140 GMT, after touching $118.60 a barrel when the New York Mercantile Exchange (NYMEX) opened for electronic trading several hours earlier than usual. London Brent crude fell 65 cents to $113.40 a barrel.
Weather models early Monday continued to show Gustav hitting the Louisiana coast later in the day as a major Category 3 hurricane, forcing companies to shut in 96 percent of Gulf oil production and 82 percent of natural gas output.
At least 12.5 percent of total U.S. refining capacity was shut down and other plants cut rates. The Louisiana Offshore Oil Port, the only U.S. port capable of offloading the biggest oil tankers, halted all operations on Sunday.
Despite the shutdowns, analysts said crude slipped from highs as forecasts showed the storm was not strengthening beyond earlier projections.
Gulf Coast refineries have cut at least 1.56 million barrels a day of production, about 9.8 percent of the U.S. total. Eight refineries have announced shutdowns, while a further five have reduced capacity.
Gustav was expected to strike land west of New Orleans, on the Louisiana coast, only days after the somber anniversary of Hurricane Katrina's devastation in 2005, though the storm was not expected to strengthen significantly once it made landfall.
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.
Iran's oil minister said on Sunday $100 a barrel was the lowest acceptable price for crude. Iran, OPEC's second-largest producer, has said the oil market is oversupplied as prices have dropped from the record high over $147 a barrel struck in July.
OPEC meets in Vienna on Sept. 9 to discuss output policy but other member nations have not come out and publicly backed Iran. Venezuela and Ecuador said on Friday that they expect the oil exporters group to maintain current output levels.
Geopolitical tensions between Russia and the West also lent support to oil prices.
Russia does not want a confrontation with the West but will hit back if attacked, Kremlin leader Dmitry Medvedev said on Sunday, a day before EU leaders meet to draft a response to Moscow's actions in Georgia.
Russia, the world's largest exporter of natural gas and the second-largest oil exporter, supplies more than a quarter of Europe's gas needs.