Oil fell on Monday after forecasts projected Hurricane Dean would steer away from the U.S. Gulf of Mexico that produces a third of the nation's oil and is home to half of its refining capacity.
U.S. crude was down 61 cents at $71.37 a barrel by 7:40 a.m. EDT. It had earlier dropped as low as $70.98, erasing Friday's rally when the Federal Reserve cut its discount rate to restore order to financial markets and as Dean menaced. London Brent crude fell 27 cents to $70.17.
The U.S. National Hurricane Center forecast Dean would remain south of the U.S. portion of the Gulf and cross the Yucatan Peninsula en route to the east coast of Mexico.
"Barring a sudden northerly veering of the track of the storm, Gulf of Mexico production should be materially unaffected," Citigroup analysts said in a research note.
Mexican oil operations in the Bay of Campeche, in the south of the Gulf of Mexico, remained vulnerable to the storm. Mexico among the top oil suppliers to the United States. But there are significant refining operations in the area under threat.
Hurricane Dean, a Category 4 storm packing winds of 145 miles per hour (230 km per hour), pounded Jamaica's southern coast on Sunday and could still strengthen into Category 5.
U.S. operators shut in around 23,000 barrels per day (bpd) of oil output and 54 million cubic feet of natural gas.
Mexico's state oil company Pemex said it had begun evacuating more than 13,000 workers from rigs.
(Reuters, 20/08/2007)