Oil prices firmed above $70 a barrel on Tuesday as a powerful cyclone hit Oman and briefly disrupted exports from the Mideast energy producer, but the gains were limited by rising stockpiles in the United States. The storm, the worst to hit Oman in 30 years, forced thousands of people from Masirah Island in the Arabian Sea and temporarily closed a terminal shipping 650,000 barrels per day of crude.
Supplies from top oil exporter Saudi Arabia, Oman's western neighbour, were expected to escape disruption. London Brent crude, currently seen as the most reliable indicator of the global market, settled up 5 cents at $70.45 per barrel. US light crude fell 60 cents to $65.61 a barrel.
Oil surged $1.33 on Monday as the storm headed for the energy-rich Gulf. At one stage it was equivalent to a maximum-force Category Five hurricane and the market expected disruptions to shipping and production.
"Cyclone Gonu is heading to the Gulf of Oman, forcing the evacuation of offshore rigs. Yet, most supply is onshore and Saudi Arabia is not expected to be affected," BNP Paribas said in a research note.
Limiting oil's gains, energy experts said they expected a report from the US Energy Information Administration Wednesday to show increases in crude oil and fuel stockpiles.
US gasoline supplies, which were expected to have risen 1.4 million barrels, have been slowly climbing for the past several weeks as refineries recover from heavy maintenance and repairs, easing worries of a supply crunch during the peak-demand summer vacation season.
Saudi Arabia said its offshore facilities would be unaffected by the storm. The kingdom, with oil output capacity of more than 11 million bpd, could easily offset any lost Oman supplies.
Any disruption from Oman appeared to be short-lived. A senior Omani oil official said an export terminal at Mina al-Fahal had reopened after a brief closure and refining and drilling operations were continuing as normal. Shipping agents said it was also business as usual in the United Arab Emirates, a major exporter.
Dealers also remained on alert for any sign of hurricanes in the Gulf of Mexico, after the Atlantic storm season began on June 1, although the first of the season - Tropical Storm Barry - eased by the weekend, pouring rain on Florida.
The Organisation of Petroleum Exporting Countries, which supplies a third of the world's oil, has blamed US refinery bottlenecks for pushing up the price of crude. But adequate supplies of Opec crude should keep oil prices from rising much further, said the group's secretary-general.
"There is no shortage as far as crude is concerned," Abdullah al-Badri said at the Reuters Global Energy Summit in London. "I don't think the price will go to $80. There are no fundamental problems in the market."