Oil pulled back slightly but remained above $70 today as a powerful cyclone in the Arabian Sea reached the coastline of Gulf producer Oman.
The storm has begun to lash Oman, forcing the evacuation of thousands of people from Masirah Island in the Arabian Sea. The country's 650,000 barrels per day of oil exports were also at risk, shipping agents said,
although shipments from Saudi Arabia, the world's top oil exporter, were expected to escape. The kingdom has enough capacity to offset any Omani losses.
London Brent crude, seen as a better indicator of the global market than US oil, was down 19 cents at $70.21 a barrel by earlier this morning after climbing $1.33 yesterday on concerns the storm could disrupt shipping and output. US light crude fell 39 cents to $65.82.
Dealers also remain on alert for any sign of hurricanes in the Gulf of Mexico after the Atlantic storm season began on June 1st, although the first of the season - Tropical Storm Barry - eased by the weekend.
Traders are also waiting for the latest snapshot of US inventories and demand, due in government data due tomorrow, as refinery capacity is struggling to return from maintenance and glitches after the start of peak summer fuel demand.
Analysts forecast gasoline stocks to have risen 1.4 million barrels last week, the fifth consecutive rise.