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Oil down as U.S. storm worries fade, killing early rally

By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell as much as 1 percent on Thursday as the government's storm monitor altered forecasts for the path of the latest U.S. hurricane, snuffing out an early rally that was prompted by fears of storm damage U.S. East Coast oil installations.

Hurricane Joaquin, which strengthened into a powerful Category 3 storm and was moving over the Bahamas, will hit land about 100 miles east of New York City in eastern Long Island as a tropical storm, the National Hurricane Center's (NHC) latest report showed.

Earlier, the NHC had forecast that the storm would hit the New Jersey coast and New York Harbor, home to several oil refineries, pipelines and other energy infrastructure.

Brent, the global benchmark for oil, was down 55 cents, or 1.1 percent, at $47.82 a barrel by 12:22 p.m. EDT (1622 GMT) after hitting a one-week high at $49.84.

U.S. crude was down 15 cents, or 0.3 percent, at $44.94. At its session high, it had been up more than $2 or 4 percent.

Over the past month, crude prices had largely traded in a $5 range.

A Houston-based broker said oil bulls bought crude in early trade as gasoline rallied more than 3 percent on the storm fears. But gasoline gave back those gains and fell about 1 percent in later trade.

Traders watch Atlantic hurricanes because they can lead to precautionary shutdowns of oil installations, and in exceptional cases, like Hurricane Sandy in 2012, damage energy infrastructure.

The NHC suggested earlier on Thursday that Joaquin could follow a course similar to Hurricane Sandy. But with the forecast track still uncertain and the storm days away from New York, energy firms said they were on alert but not shutting any facilities yet.

"The latest update on Joaquin is bearish," said Scott Shelton, crude oil broker and commodities specialist at ICAP in Durham, North Carolina.

Heightened geopolitical risk from the worsening war in Syria also boosted crude futures in Thursday's early trade, although gains were limited by more data suggesting an economic slowdown in China and a spike in weekly U.S. oil inventories. [EIA/S]

(Additional reporting by Alex Lawler in London and Henning Gloystein; Editing by Frances Kerry and David Gregorio)