Oil slips as Hurricane Ida weakens, OPEC+ in focus

© Reuters. FILE PHOTO: A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

By Alex Lawler

LONDON (Reuters) -Oil slipped on Monday, giving up an earlier rally to a four-week high, as Hurricane Ida weakened after forcing shutdowns of U.S. Gulf oil production, and OPEC+ looked set to go ahead with a planned oil output increase.

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 26 cents, or 0.4%, at $72.44 by 1340 GMT, having reached $73.69 earlier, the highest since Aug. 2. U.S. crude fell 9 cents to $68.65, 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 2% 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 Commonwealth Bank of Australia (OTC:CMWAY). "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 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.

OPEC delegates say they expect the increase to go ahead, although Kuwait's oil minister said on Sunday it could be reconsidered.