Oil prices dropped from a four-week high on Monday as Hurricane Ida weakened after forcing precautionary shutdowns of U.S. Gulf oil production, and attention turned to an OPEC meeting on Wednesday to discuss a further output boost.
Within 12 hours of coming ashore, the storm had weakened into a Category 1 hurricane. Nearly all offshore Gulf oil production, or 1.74 million barrels per day, was suspended in advance of the storm.
Brent crude was down 35 cents or 0.5% at $72.35 by 0815 GMT, having reached $73.69 earlier, the highest since Aug. 2. U.S. crude fell 69 cents or 1% to $68.05, having earlier touched $69.64, the highest since Aug. 6.
"Hurricane Ida will dictate oil's near-term direction," said Jeffrey Halley, senior market analyst at OANDA. "If Ida weakens and its path of destruction is lower than expected, oil's rally will temporarily lose momentum here."
While crude fell on anticipation of a quick supply recovery, U.S. gasoline was up almost 3% as power outages added to refinery closures on the Gulf coast and traders weighed the possibility of prolonged disruptions.
"It's still early days," said Vivek Dhar, analyst at Commonweath Bank of Australia. "Oil products, like gasoline and diesel, are likely to see prices rise more acutely from refinery outages especially if there are difficulties in bringing refineries and pipelines back online."
Brent has rallied almost 40% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, and some demand recovery from last year's pandemic-induced collapse.
OPEC+ meets on Wednesday to discuss a scheduled 400,000 bpd increase in its oil output, in what would be a further easing of the record output cuts made last year.
Kuwait's oil minister said on Sunday the increase could be reconsidered, although OPEC delegates have said they expect it to go ahead.