NEW YORK - Crude prices dropped below $113 a barrel in volatile trading Monday as Tropical Storm Fay swirled toward Florida but appeared unlikely to disrupt oil installations in the Gulf of Mexico.

Light, sweet crude for September delivery fell $1.17 to $112.60 in morning trading on the New York Mercantile Exchange, after earlier rising as high as $115.35. The contract fell $1.24 on Friday to settle at $113.77 a barrel, about $35, or 24 per cent, lower than its trading record of $147.27, set July 11.

At the pump, a gallon of regular fell another penny overnight to a new national average of $3.741, according to auto club AAA, the Oil Price Information Service and Wright Express. With consumers cutting back on driving to save money, prices have now dropped 9 per cent from the record $4.114 retail gas reached July 17.

Fay, the sixth named storm of the 2008 Atlantic season, was passing over western Cuba en route to the Florida Keys after leaving at least five people dead in Haiti and the Dominican Republic. The storm is expected to near hurricane strength as it approaches the Keys later Monday but does not currently pose a threat to oil platforms in the Gulf, forecasters said.

Royal Dutch Shell PLC said it evacuated 425 workers from the region as a precaution but said it will redeploy them if the storm remains on its current track. So far during this year's hurricane season in the Atlantic Ocean, no storm has significantly damaged oil installations in the Gulf.

"Fay looks like it will be far removed from major oil-producing areas, but until it's better defined we should still see some volatility in the market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

A slightly weaker dollar kept oil prices from slipping further. A falling dollar typically pushes oil prices higher as investors buy crude and other commodities as hedges against inflation.

Still, analysts said that if the dollar's rising trend continued in coming weeks and months, it likely would limit gains in oil prices.

A forecast from the Organization of the Petroleum Exporting Countries on Friday of lower global oil demand growth helped to keep prices from rising higher.

In its monthly oil report, the organization forecast world appetite for oil this year would grow by 1 million barrels a day, a reduction of 30,000 barrels a day from its previous forecast for demand growth for 2008. It also said growth for 2009 will be 900,000 barrels a day, which it said would be the lowest growth in world demand since 2002.

Demand growth from the major industrialized countries will actually decline, OPEC said, with non-OECD countries accounting for all oil demand growth next year.

"It's another signal that conditions are easing," Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.

News that oil flows in the Baku-Tbilisi-Ceyhan pipeline in Turkey could resume soon and the announced start of the withdrawal of Russian troops from Georgia were among the factors keeping oil prices in check.

Oil market traders were also keeping an eye on possible tensions in Pakistan after President Pervez Musharraf announced his resignation Monday.

In other Nymex trading, heating oil futures fell 1.87 cents to $3.1004 a gallon, while gasoline prices lost 1.85 cents to $2.8417 a gallon. Natural gas futures fell 14.9 cents to $7.943 per 1,000 cubic feet.

In London, October Brent crude fell 13 cents to $112.42 a barrel.

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Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

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