Aug 26. In global petroleum market headlines, oil prices ended a choppy session slightly higher Monday, edging back above USD 115 a barrel after Tropical Storm Gustav formed in the Caribbean. Light, sweet crude for October delivery rose 52 cents to settle at USD 115.11 a barrel on NYMEX after earlier falling as low as USD 113.68. In London, October Brent crude rose 33 cents to USD 114.25 on the ICE Futures exchange. Crude traded erratically most of the day in lockstep with a wavering U.S. dollar, which has become the focal point for investors trying to figure out whether crude is going higher or lower. The greenback gained ground against the euro earlier Monday, retreated, then gained again in the space of a few hours. A stronger dollar typically makes oil less attractive to investors who buy commodities as a hedge against inflation and weakness in the U.S. currency. But on the bullish side, prices found support on fears that Gustav could threaten oil and natural gas production in the Gulf of Mexico. The storm was heading for the Dominican Republic and Haiti with maximum sustained winds of near 60 mph. Oil's uncertainty Monday followed a round of hyper-volatile trading last week. On Friday, crude plunged USD 6.59, or 5.4%, to USD 114.59 a barrel. It was crude's largest single-day price drop in percentage terms since December 27, 2004. That decline wiped out gains from an almost USD 6 rally on Thursday. Crude oil has dropped about USD 30, or 25%, from record trading levels above USD 147 a barrel reached last month. Still, unresolved tensions between the U.S. and Russia over the conflict in Georgia could rekindle supply worries and send prices higher. Russia pulled the bulk of its troops and tanks out Friday under a cease-fire agreement, but built up its forces in and around South Ossetia and Abkhazia, both separatist regions. A U.S. Navy destroyer loaded with humanitarian aid – although, according to some experts, could be a cover-up for the buildup of naval forces in the area – reached Georgia's Black Sea port of Batumi on Sunday, a development that a Russian general suggested would worsen tensions between the former Cold War foes. A Monday vote by Russian lawmakers unanimously asking President Dmitry Medvedev to recognize the independence of Georgia's two rebel provinces added to the concerns of energy markets. Despite the conflict, we tend to believe that energy flows from Russia to the West are safe and see little chance that oil will be used by Russia as a bargaining tool. Oil is the weapon of last resort, not of first resort and it would make no sense for the country to limit exports of crude or products to European countries. Moving forward, we can see a tug-of-war right now between the dollar, which is pulling oil down, and the storm, which is pulling crude higher. That said, in our opinion the market's inability to rally in the face of bullish news such as threats to energy supplies from a conflict between Russia and Georgia and another tropical storm suggests that crude remains in a downward trend.