Updated from 10:32 a.m. EDT

Crude oil was down more than $4 in very active trading on the NYMEX ClearPort electronic exchange around noon on Monday. The National Hurricane Center lowered the strength of Hurricane Gustav from 3 to 2 Monday morning, sending crude oil into free fall.

However, in its most recent advisory, released at 11:00 a.m. EDT, the National Hurricane Center said that Gustav remains "an extremely dangerous" storm, and the storm's path crossed a swath of the Gulf of Mexico considered critical for U.S. energy production.

The October WTI contract was recently down $4.11 at $111.35 a barrel, and Brent had fallen $3.87 to $110.18 a barrel on the ICE electronic exchange.

Reformulated gasoline was falling 10 cents at $2.75 a gallon, heating oil was sliding 11 cents at $3.08 a gallon, and natural gas was last seen selling for $7.56 per million British thermal units, down 38 cents from last Friday's settlement price.

While it is much too early to begin assessing whether Gustav caused any structural damage to offshore rigs or platforms in the Gulf, the most recent advisory by the U.S. Minerals Management Service estimated that more than 75% of all oil production in the Gulf of Mexico is currently shut-in because of the storm.

U.S. stock markets are closed for Labor Day.