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Oil prices hold above $63/barrel

SINGAPORE: Oil steadied above $63 a barrel on Tuesday, after a post-Katrina slide brought on by concerns that high prices and slowing US economic growth might curtail demand.

Losses were checked by nagging worries that the US oil industry’s recovery from Hurricane Katrina two weeks ago had hit a plateau, leaving 5 percent of the country’s refining capacity and nearly half its Gulf of Mexico oil production offline.

US light crude added 5 cents to $63.39 a barrel, after dropping 74 cents in New York on Monday. Prices are now more than $7 below their record-high two weeks ago.

London Brent crude gained 6 cents to $61.86 a barrel, after falling more than $1 on Monday. Katrina caused fuel and crude prices to spike after it slammed into the US Gulf Coast in late August, cutting nearly all offshore production and shutting eight refineries.

Analysts fear that the economic shock from high prices and the disaster itself could have more bearish implications, curbing the rapid growth in oil consumption that has helped crude prices double in the past two years.

“The whole thing about Katrina ends up as a psychological shock. US consumers back off after gasoline prices sky-rocketed,” said Tony Nunan, a manager at Mitsubishi Corp. on Tokyo.

Fears of a gasoline-supply crunch in the world’s top oil consumer have also been eased by emergency imports and the post-summer drop in demand, an unnamed US Energy Department official said on Monday. China, whose voracious oil import appetite took the world by storm last year, cut its August crude imports by 6.1 percent from the year-ago period to their lowest levels in eight months at 2.06 million barrels per day (bpd), as refiners reduced purchases amid heavy losses on domestic sales, customs data showed.

Undermining prices further, the world’s No. 2 oil consumer reiterated on Tuesday it would not use imported crude to fill newly constructed strategic reserves. “Currently the international oil prices are at high levels.

Against this backdrop, we would face big risks if we buy oil from the international market,” said Zhang Guobao, vice director of the National Development and Reform Commission.

Despite bearish market signs, dealers remained worried about the potential for a drawn-out recovery from Katrina to stretch supplies further, especially ahead of the northern hemisphere winter when global demand reaches its peak. reuters

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