The Gulf is home to 25 percent of US oil and gas production.
Some analysts are now predicting that prices could aim for the once unthinkable US$80 a barrel, a level economists fear could severely dent consumer demand and curb business activities.
In Asian electronic trade, the New York contract for light sweet crude for delivery in October had blazed to a new record high of US$70.80.
But by the end of trade in New York, the contract stood at US$67.20, up US$1.07 on Friday’s close.
Prices reversed course after the US Department of Energy said it could release strategic crude reserves in response to Hurricane Katrina.
The southern state of Louisiana is home to two of the four underground sites at which the US government stores its 700-million-barrel strategic reserve, which is meant to be tapped only in emergencies.
In the Gulf of Mexico, which accounts for a quarter of total US oil output, 92 percent of crude and 83 percent of natural gas production were shut down by Katrina.
The closures threaten production at Port Fourchon, Lousiana, near New Orleans, which handles around one-sixth of US oil supply and rigs in the Gulf of Mexico.
Agbeli Ameko, managing partner at First Enercast, said crude prices could push toward US$75 a barrel and said US$80 a barrel in the short term was realistic.
Oil prices have been driving up to new record highs as refineries struggle to cope with booming energy demand around the world.
Problems with production anywhere have been sending prices up still further.
The hurricane was expected to have a significant short- and long-term impact on energy markets, impacting production offshore and onshore, and shutting in refining and processing facilities.