Oil extended its slide towards $80 a barrel on Tuesday on continued profit-taking from last week's record high, as more output was restored in the Gulf of Mexico following shutdowns triggered last week by a storm.
U.S. crude for November fell 73 cents to $80.22 a barrel by 1000 GMT, adding to Monday's 67-cent loss to bring it nearly $4 below the record $83.90 set by the October contract last Thursday.London Brent crude shed 50 cents to $78.41 a barrel.
U.S. crude oil production in the Gulf of Mexico rose to 80.7 percent of capacity on Monday, up from 37 percent on Friday, the U.S. Minerals Management Service said, as oil companies redeployed workers to offshore rigs.
"What we saw was a risk premium embedded into crude prices, but now that the storm passed without damaging production facilities, we see prices coming down," said Gerard Burg, Minerals and Energy Economist at National Australia Bank.
But traders kept a wary eye on upcoming storm threats. The U.S. National Hurricane Center said on Monday a tropical cyclone could form in the southwestern Gulf of Mexico, while a couple of tropical depressions could form in the Atlantic.
However, three out of four weather models predict the system will steer clear of U.S. oil and gas producing facilities.
"In the short term, we believe there's potential for a price correction," said Harry Tchilinguirian, senior oil analyst at BNP Paribas, citing heavy refinery maintenance expected next month and a seasonal drop in demand as bearish factors.
(Reuters)