Oil drifted below $70 a barrel on Friday after Mexico's Gulf oil rigs suffered only minor damage from Hurricane Dean and in response to fears of a U.S. economic slowdown.

U.S. light crude for October delivery fell one cent to $69.82 a barrel by 0742 EDT. U.S. crude had gained 57 cents on Thursday, ending a three-day losing streak that had knocked prices to their lowest since late June.

London Brent crude lost nine cents to $69.77 a barrel.

The oil market is drifting into an anemic mode, said Olivier Jakob, of oil consultancy Petromatrix.

There are currently no tropical storms on the radar screen, no real expectations on the next OPEC meeting, no significant supply disruptions or new geopolitical developments, no clear consensus on equities.

The lack of storm damage had shifted the emphasis back to selling U.S. crude futures and buying Brent, particularly given an increase in crude oil stocks in the U.S. last week, he said. Mexico's Gulf oil rigs have already restarted production in the Bay of Campeche in the aftermath of Hurricane Dean.

State energy monopoly Pemex, one of the top three oil suppliers to the United States, produced 342,000 barrels of crude oil in the region on Thursday.

The company had shut in around 2.65 million barrels a day of output as Hurricane Dean had approached earlier this week.

Two of Mexico's three main oil shipping ports reopened on Thursday after being closed as Dean swept through the Gulf of Mexico.

Oil is also sensitive to moves in world financial markets, which are concerned that troubles in the mortgage sector in the United States could spill over into the wider economy.

Countrywide Financial, a major U.S. mortgage lender, said on Thursday the U.S. housing downturn could drag the domestic economy into recession.

Concern over the U.S. housing market is putting the brakes on price gains, said Gerard Rigby from Fuel First Consulting in Sydney.

The U.S. mortgage crisis has spread to other markets in recent weeks and oil has been hit as investors, fearing a credit squeeze, have sold to raise cash.

Asian stocks fell on Friday in response to fears that the United States, the world's biggest economy, could decline into recession.