Oil eased below $79 a barrel on Monday, turning lower after prices touched their highest in almost eight weeks as tropical storm Alex disrupted Mexican exports and prompted some U.S. producers to evacuate platforms.
U.S. crude for August was down 38 cents at $78.48 as of 5:42 a.m. ET. It earlier rose as high as $79.38, the highest intra-day price since May 6. August Brent crude was down 49 cents at $77.63.
It's profit-taking after the near two-month high and the failure to reach the $80 level, said Carsten Fritsch, an analyst at Commerzbank.
The market is oversupplied. Other factors are supporting prices at the moment, in particular the tropical storm. But given the high level of stockpiles, any supply disruptions could be met easily as long as they are short-lived, he added.
Over the weekend Alex became the first named storm of the 2010 Atlantic hurricane season, which runs from June through November and that forecasters expect to be active and possibly match the record-breaking 2005 season.
European equities edged higher and the U.S. dollar was little changed against a basket of other currencies as investors assessed the implications of a G20 meeting. Gold rose to near its record high.
World leaders agreed on Sunday to take different paths for cutting budget deficits and making their banking systems safer, a reflection of the uneven and fragile economic recovery in many countries.
SOME U.S. GULF OUTPUT SHUT
Mexico closed two of its main Gulf of Mexico oil exporting terminals on Sunday as Alex moved over the Yucatan peninsula, the government said.
The ports of Cayo Arcas and Dos Bocas typically handle combined exports of more than 1.1 million barrels per day (bpd), or about 80 percent of Mexico's shipments abroad, which mainly head to U.S. refineries.
Shell Oil shut subsea production at two platforms, and BP
evacuated some personnel from three Gulf of Mexico platforms, the companies said on Sunday.
The U.S. National Oceanic and Atmospheric Administration forecasts 14 to 23 named storms for this year's season, with eight to 14 developing into hurricanes. Three to seven of those could be major Category 3 or above hurricanes.
Traders and investors also are seeking evidence that the world's largest economy continues to recover. U.S. May personal spending data is due at 1230 GMT on Monday and June unemployment statistics are to be published on Friday.
(Additional reporting by Alejandro Barbajosa; Editing by Jane Baird and Alison Birrane)