By Arunima Kumar
(Reuters) -Oil prices rose more than 1% on Thursday, extending a rebound spurred by concern over Hurricane Francine's impact on U.S. output, though a gloomy demand outlook capped gains.
Brent crude futures for November were up 95 cents, or 1.4%, to $71.56 a barrel by 1322 GMT. U.S. crude futures for October rose $1.02, or 1.5%, at $68.33.
Both contracts gained more than 2% on Wednesday as offshore platforms in the U.S. Gulf of Mexico were shut and coastal refinery operations were disrupted by Francine's landfall in southern Louisiana.
"Hurricane Francine has likely disrupted about 1.5 million barrels of U.S. oil production, which we estimate will reduce September production in the Gulf of Mexico by around 50,000 barrels per day (bpd)," UBS analysts said.
They added that they expect the price of Brent crude oil to move back up above $80 per barrel over the coming months.
Nearly 39% of oil and almost half of natural gas production in the Gulf of Mexico was offline on Wednesday, the offshore regulator said. A total of 171 production platforms and three rigs had been evacuated.
"The region accounts for about 15% of U.S. oil production, with any disruptions in production likely to tighten supplies in the near term," said Priyanka Sachdeva, senior market analyst at Phillip Nova, a Singapore-based brokerage.
But with the storm set to dissipate after landfall, the oil market's attention began to turn to lower demand.
On Thursday the International Energy Agency (IEA) cut its 2024 oil demand growth forecast by 70,000 bpd, or about 7.2%, to 900,000 bpd, citing muted Chinese demand.
U.S. oil stockpiles rose across the board last week as crude imports grew and exports dipped, the Energy Information Administration (EIA) said on Wednesday.
However, the medium-term trend remains bearish for WTI crude, supported by weak demand from China and "growth scare concerns" in the U.S., said Kelvin Wong, senior market analyst at OANDA.
Earlier in the week, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth this year and trimmed its expectation for 2025, its second consecutive downward revision.
Both oil benchmarks tanked on Tuesday after the downward revision.
Meanwhile, the European Central Bank cut interest rates again on Thursday as inflation in the euro zone slows and economic growth falters, but provided almost no clues on its next step. Lower interest rates could stimulate economic growth and increase demand for oil.