Oil fell further on Monday as investors continued to weigh evidence of demand destruction against lost energy supplies from the Gulf of Mexico and strike-hit French refineries ahead of winter.
US crude oil futures dropped 54 cents to US$61.30 a barrel by 1640 GMT, just above a nine-week low of
US$60.70 touched on Thursday. London Brent crude was off 94 cents at US$58.26.
Prices tumbled US$5 a barrel last week after US government data showed lower petrol demand in the United States, the world's top energy consumer.
"The financial markets appear to be betting that demand has slowed and supply is coming back on," said Richard Batty of Standard Life Investments.
"There are some signs that high oil prices are making consumers adjust the way they spend money and that will affect demand at the margin. But, underlying demand in the US economy is pretty robust." Some analysts say the oil lost from storms in the US Gulf and French strikes outweighs any erosion in consumption.
But rather than fret over potential petrol shortages, dealers focused on apparent destruction of demand. Nymex unleaded petrol futures posted the steepest declines, falling 2 per cent to 1.791 cents a gallon.
"The surge in motor petrol prices has been phenomenal...and has resulted in a temporary demand contraction of about 3 per cent or 320,000 bpd," said a Merrill Lynch report.
"On the other hand, we estimate that long-run US petrol demand has only dropped by about 30,000 bpd." Oil traders say prices have also been pressured by the West's readiness to use government-held strategic inventories to offset lost crude and fuel output.
But signs of weaker demand have eased the need for extra emergency oil aid, said the head of the International Energy Agency (IEA), which initiated a 60 million-barrel release of member inventories a month ago.
Strikes in France have compounded global fuel supply woes, coinciding with refinery outages in the US Gulf Coast after hurricanes Katrina and Rita.
Although commercial heating oil inventories are at the top of the range for this time of year, the stage is set for a price spike.
"If the winter is really severe it could push up demand, causing prices to rise," said Batty. "This will be just at the time when the US economy could be accelerating as hurricane-related spending comes through."
- REUTERS
<EM>Oil:</EM> Investors size up demand
Oil fell further on Monday as investors continued to weigh evidence of demand destruction against lost energy supplies from the Gulf of Mexico and strike-hit French refineries ahead of winter.
US crude oil futures dropped 54 cents to US$61.30 a barrel by 1640 GMT, just above a nine-week low of
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