Oil was near $71 a barrel on Tuesday and pared losses caused by relief Hurricane Dean would spare the U.S. Gulf Coast, an area that is home to half of the country's refining capacity and a third of its oil production.
U.S. crude was 9 cents down at $71.03 a barrel by 7:44 a.m. EDT, off lows of $70.60. It had dropped 86 cents in the previous session after forecasts showed that Dean was taking a more southerly path toward Mexico, skirting the U.S. Gulf. London Brent crude was 14 cents up at $69.99.
U.S. crude has tested the $70 psychological support level several times in the past week and some dealers say a breach of that level could trigger another bout of heavy selling.
"Some traders expect prices to fall to around $67 a barrel without significant damage from the hurricane," said Koo Ja-kwon, crude analyst at Korea National Oil Corp (KNOC).
Dean, the Atlantic season's first major storm, grew into a maximum-strength Category 5 hurricane with winds of around 160 miles per hour (256 kph) on its way to the Yucatan Peninsula, the U.S. National Hurricane Center said.
It is expected to weaken before crossing into the Bay of Campeche, where Mexico's state oil company Pemex has evacuated all its oil and gas wells, shutting in 2.65 million bpd of oil output -- slightly more than Venezuela's entire production.
U.S. operators, by contrast, halted evacuations from Gulf of Mexico oil and natural gas platforms and began restoring the small amount of production they shut in preparation for Dean.
(Reuters, 21/08/2007)