Oil held near $46 a barrel today, close to its highest since March, lifted by US producers shutting most of their offshore Gulf of Mexico output ahead of Hurricane Laura.

A new report also showed a drop in US crude inventories. 

Renewed worries over Covid-19, which has squeezed demand and sent prices to record lows in April, capped gains after reports this week of patients being re-infected, raising concerns about future immunity. 

Brent crude slipped 14 cents, or 0.3%, to $45.72 a barrel, while US West Texas Intermediate crude fell 17 cents, or 0.4%, to $43.18. 

Both benchmarks had settled at a five-month high yesterday. 

Analysts said that oil traders will be preoccupied with the hurricane today but once the danger passes, demand considerations will come into focus again. 

The US energy industry is preparing for a major hurricane strike.

Producers shut 1.56 million barrels per day (bpd) of crude output, representing 84% of the Gulf of Mexico's offshore production - close to the 90% outage that Hurricane Katrina brought 15 years ago. 

"We do see some support on the back of hurricane activity," Dutch bank ABN AMRO said in a report. "The threat of being infected by the Covid-19 virus threatens a further recovery in oil demand." 

Oil prices yesterday were also boosted by US and Chinese officials reaffirming their commitment to a Phase 1 trade deal. 

Further support came from American Petroleum Institute figures showing US crude stocks fell more than expected. 

A record oil output cut by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has helped to lift Brent from April's 21-year low below $16.

The US government's Energy Information Administration report later this afternoon will be in focus to see if it confirms the API figures.