Oil rises as dollar falls, US braces for Hurricane Idalia impact on energy

Oil prices edged higher on Tuesday as the dollar slid, while investors debated the potential impact to energy supply and demand from Hurricane Idalia set to hit Florida this week.

U.S. West Texas Intermediate futures rose $1.07, or 1.3%, to $81.17 a barrel by 1:42 p.m. EDT [1742 GMT], while Brent crude futures were up by 98 cents, or 1.2%, to $85.40 a barrel.

The U.S. dollar index dropped on Tuesday after data showed that U.S. job openings, a measure of labor demand, fell in July. Softness in the labor market could encourage the Federal Reserve to slow down interest rate hikes, experts said.

A softer greenback makes dollar-denominated oil less expensive for investors holding other currencies, boosting demand.

Meanwhile, Hurricane Idalia is expected to strengthen into a major hurricane with maximum sustained winds of 125 miles per hour (201 kilometers per hour) before hitting the northwest coast of Florida early on Wednesday, according to the U.S. National Hurricane Center (NHC).

The hurricane will likely impact fuel distribution systems and hit fuel consumption in the affected regions just ahead of the Labor Day federal holiday on Sept. 4, said Mizuho analyst Robert Yawger.

The weather system is not expected to hit major oil producing platforms in the U.S. Gulf of Mexico. However, oil major Chevron Corp evacuated some staff from three platforms in the region.

Production was continuing at Chevron-operated Gulf of Mexico oil and gas facilities.

While Idalia does not pose a major supply risk, it does point to a rising risk of potential future outages in the Gulf of Mexico in what is expected to be a busy hurricane season, Yawger noted.

Supply concerns have also been heightened by a fire at a Marathon Petroleum refinery last week after a chemical leak ignited two giant storage tanks filled with naphtha.

On Monday, the company said it planned to restart units at the 596,000 barrel per day (bpd) refinery in Garyville, Louisiana, the third-largest in the United States.

U.S. crude oil inventories are expected to have dropped in the latest week, according to a preliminary Reuters poll on Monday. Crude stocks estimates from the American Petroleum Institute are due later on Tuesday, while official government figures will be posted on Wednesday.

Meanwhile, U.S. energy firms cut the number of active oil rigs for a ninth month in a row, according to industry data released on Friday, indicating that crude oil output could slow down in the country over the coming months.

(Reporting by Shariq Khan in Bengaluru; Additional reporting by Natalie Grover in London, Emily Chow in Singapore and Arathy Somasekhar in Houston; Editing by David Goodman,, Mike Harrison and Josie Kao)