Oil prices rebounded Monday, after falling more than 16 dollars last week, as a tropical storm barreled into the Gulf of Mexico and the international community tightened pressure on Iran to halt its nuclear program.

New York's main contract, light sweet crude for August delivery, advanced 2.16 dollars to close at 131.04 dollars a barrel.

In London, Brent North Sea crude for September delivery climbed 2.42 dollars to settle at 132.61 dollars

The hurricane season, which began in June and lasts until the end of November, had been largely uneventful up until now.

Tropical Storm Dolly churned over the Gulf of Mexico on Monday, threatening to grow into a hurricane within 24 hours as it headed toward the Mexico-Texas border, the US National Hurricane Center said.

"Well hello Dolly, well hello Dolly, it's not so nice to have you back where you are now," said Alaron Trading analyst Phil Flynn.

"It looks like we are trading hurricane mode and we will most likely buy the rumor and sell the fact as we hope that Dolly's bark will be worse than her bite. Dolly is no dog but is expected to become a category one hurricane," Flynn said.

The governments of Mexico and the US state of Texas issued a hurricane watch for coastal areas, the Miami-based hurricane center said.

"Oil prices were up partially on the back of the weather concerns as we saw the first tropical storm of 2008 in the Atlantic," said Sucden analyst Michael Davies.

The storm "has served as a reminder that there remains a threat to oil and gas facilities in the Gulf of Mexico while we remain in the hurricane season," Sucden's Davies said.

Anglo-Dutch oil giant Shell said it was winding up a second day of evacuating 185 personnel from some of its Gulf operations areas ahead of the approaching storm.

"We do not expect any impact on Shell-operated production in the Gulf of Mexico," the company said on its website.

Oil prices also were supported by geopolitical tensions with Iran, the world's fourth-largest crude oil producer, after the nuclear talks in Geneva made no progress.

The US and other major powers suspect Iran's nuclear drive aims to make weapons, but Tehran insists its objective is strictly energy production.

US Secretary of State Condoleezza Rice and British Prime Minister Gordon Brown, in separate comments Monday, warned Iran would face additional sanctions if it did not halt its nuclear program.

"The weekend meeting involving Iran really didn't resolve the issues surrounding the nuclear program so the geopolitical risk premium has increased," said Commonwealth Bank of Australia strategist David Moore.

The Centre for Global Energy Studies (CGES), in its latest monthly report on the oil market, urged OPEC to sell its heavy sour crude -- which is more expensive to refine than light, sweet crude -- at a greater discount.

The Organization of the Petroleum Exporting Countries, by refusing to increase oil output, appears to be seeking an upper limit for crude prices, CGES said.

"The recent sharp fall in oil prices may seem to suggest that it found that limit at 150 dollars per barrel. If not, then we can expect oil prices to surge again until they rise high enough to drive the world deeper into recession," the London-based consultancy said.

Oil prices struck record highs above 147 dollars earlier this month, boosted by weakness in the US dollar and simmering tensions over Iran.

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