FIN: UPDATE 6-Oil falls towards $112 on storm impact
* Brent reverses earlier gains to dip $2 intra-day
* Rigs, refineries shut as Tropical Storm approaches (Recasts, adds quote, updates prices)
By Emma Farge
GENEVA, Aug 27 (Reuters) - Crude oil futures reversed earlier gains to fall towards $112 a barrel on concerns that a tropical storm would shut U.S. refineries and as western governments mulled the release of strategic reserves to calm oil prices.
Tropical Storm Isaac swirled into the Gulf of Mexico on Monday and began approaching the Louisiana refining hub, prompting U.S. energy companies to start shutting refineries and raising prospects for a jump in crude oil stocks.
Brent crude futures were down by $1.59 at $112 a barrel by 1359 GMT after earlier falling more than $2.
U.S. crude was down by $1.35 at $94.80.
"With refineries shutting down along the U.S. Gulf Coast, traders are weighing this up and seeing there may be a glut of crude oil in the market," Carl Larry, analyst at OilOutlooks in New York said.
"Isaac is also adding to talk of a possible release from the Strategic Petroleum Reserve, so traders are cautious at these levels after a 2-month long rally," he added.
Marathon Petroleum Corp said on Monday it was initiating the shutdown of its 490,000 barrels-per-day (bpd) refinery in Garyville, Louisiana.
In another indication that regional crude stocks could rise, a fire burned for a third day at Venezuela's biggest refinery on Monday, raising doubts about a speedy restart to operations.
Oil prices have risen nearly 30 percent since June with international sanctions hitting Iranian exports and maintenance affecting North Sea oil flows.
Reuters reported that the White House was "dusting off" old plans for a possible release on fears that rising oil prices could undermine the effect of sanctions on Iran.
The International Energy Agency, whose chief recently dismissed the need for a coordinated release, is now thought to have agreed to the idea, an industry journal said last week.
Earlier on Monday, oil prices rose to a daily high of $115.50 a barrel partly on hints of another round of monetary stimulus by the U.S. Federal Reserve ahead of a meeting with Fed Chairman Ben Bernanke later this week.
Prices fell from highs after German business sentiment dropped for a fourth month in a row in August to reach its lowest level since March 2010, stoking concerns about the impact of the euro zone crisis on Europe's largest economy. (Additional reporting by David Sheppard; editing by James Jukwey)
