Oil drops below $78 as tropical storm impact weaker than expected

London — Oil fell below $78 a barrel on Wednesday as a tropical storm heading for the US Gulf coast weakened, offsetting support from forecasts of lower US inventories and sanctions against Iran.

Crude had jumped the previous day as oil companies shut dozens of offshore platforms in anticipation of damage from tropical storm Gordon. But by Wednesday the storm was weakening, reducing its threat to oil producers.

“Tropical storm Gordon made an uneventful landfall after dashing expectations that it would strengthen to a hurricane,” said Stephen Brennock of oil broker PVM. “Instead, it weakened considerably and deviated away from oil-producing areas, which, as a result, has taken the wind out of bulls’ sails.”

Brent crude, the global benchmark, fell 47c to $77.70 a barrel by 8.32am GMT. On Tuesday, prices had climbed to $79.72, their highest since May. US crude was down 72c at $69.15.

“Storm in a teacup,” said analysts at JBC Energy, referring to Gordon’s limited impact on oil pricing.

Oil could gain support if weekly reports on US inventories show a drop in crude inventories, as expected. Analysts estimate, on average, that stocks fell by about 1.9-million barrels last week.