New York's main contract, light sweet crude for August delivery, gained 99 cents to 131.97 dollars a barrel.
"Dolly is one of the factors. The situation is not so serious at the moment, but (the storm's) direction is hard to predict," said Ken Hasegawa, a broker at Newedge Japan.
The market had rebounded yesterday, after falling more than $16 last week, as Dolly bounded into the Gulf of Mexico and the international community tightened pressure on oil producer Iran to halt its nuclear programme.
Forecasters issued a hurricane warning today as Tropical Storm Dolly threatened to grow into a hurricane within 24 hours near the Mexico-Texas border.
"A hurricane warning is in effect for the coast of Texas from Brownsville to Port O'Connor. A hurricane warning is also in effect for the northeast coast of Mexico from Rio San Fernando north to the border with the United States," the Miami-based National Hurricane Center said at 0600 GMT.
The warning means hurricane conditions are expected in the area in the next 24 hours. "Preparations to protect life and property should be rushed to completion," the NHC warned.
At 0600 GMT, the center of the storm was about 515 km southeast of Brownsville, Texas, as it moved westward near 28 km/hr, it said.
