Brent crude oil steadied below $113 on Wednesday as Hurricane Isaac left U.S. Gulf Coast oil production largely untouched and after major Western economies said they were ready to release oil reserves to curb prices.
U.S. energy companies have shut most facilities in the Gulf of Mexico, as a precautionary measure, cutting the region's oil output by more than 90 percent.
But Isaac, which hit Louisiana, driving water over the top of a levee on the outskirts of New Orleans, skirted major energy installations in the Gulf of Mexico.
Brent crude for October fell more than $1 per barrel to a low of $111.50 before recovering to around $112.70 by 1340 GMT. U.S. crude was down 44 cents at $95.89.
"It is expected that oil production in the Gulf of Mexico will quickly return to normal," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.
Worries about supply disruptions resulting from Isaac on Monday pushed Brent to a high of $115.50 per barrel, while NYMEX futures hit a peak of $97.72. Brent has risen around 7 percent so far this month while U.S. oil has gained 9 percent, its biggest monthly rise since October 2011.
Isaac has brought high winds and soaking rains to southern U.S. states, posing the first test for multibillion-dollar flood defences put in place in New Orleans after Hurricane Katrina devastated the U.S. Gulf Coast seven years ago.
Also putting a dampener on oil prices was a statement by finance ministers of the Group of Seven most industrialised nations (G7) on Tuesday that the West was ready to tap strategic oil reserves to dampen oil prices that could hit global growth.
"We stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied," the G7 said.
"The current rise in oil prices reflects geopolitical concerns and certain supply disruptions. We encourage oil-producing countries to increase their output to meet demand."
The White House has been considering a release of strategic reserves for some weeks but such a move would be controversial.
The head of the International Energy Agency has voiced strong opposition to any use of emergency oil stocks unless there is a supply shortage.
Maria van der Hoeven, executive director of the agency that represents 28 energy importing countries, told Reuters on Tuesday higher oil prices alone did not justify a release and world oil markets could cope with the loss of Iranian exports, hit hard by U.S. and European sanctions against Tehran.
Oil came under some pressure from an unexpected rise in U.S. crude inventories, according to a report from the American Petroleum Institute (API). U.S. crude oil stocks rose 5.5 million barrels last week, against expectations for a 1.5 million-barrel drop.
The market awaited inventory data from the U.S. Energy Information Administration at 1430 GMT.
Clues to whether the U.S. Federal Reserve is leaning towards more stimulus are expected from Chairman Ben Bernanke in a speech on Friday at an annual meeting at Jackson Hole, Wyoming. Bernanke has used the event in the last two years to indicate the Fed's policy intentions.
A poll of 61 economists gave a 45 percent chance of the Fed announcing a third round of quantitative easing, or QE3, after its policy meeting on Sept. 12-13.
Walter de Wet, commodities analyst at South Africa's Standard Bank, said oil should be one of the main beneficiaries of any additional QE: "Any indication of the U.S. Fed signalling this Friday (that) they will provide more monetary stimulus should keep the market supported."
Reuters monthly oil price poll, based on forecasts from 28 analysts, shows they have raised their oil price forecasts for this year and 2013 due to supply concerns and to expectations for a further round of monetary policy stimulus.
The poll projects Brent at an average of $109.50 in 2012, up $1.20 from the July poll. For 2013, Brent is forecast to average $107.20 a barrel, a rise of 70 cents from July. (Editing by James Jukwey)