Oil: Prices back above US$58

LONDON, Feb 16 Reuters - Oil climbed back to US$58 on Thursday, halting a two-week slide that has wiped 15 per cent off the price, but analysts said the recovery was likely to be short lived with US petrol supplies at a six-year high.

US crude was up 45 cents at US$58.10 a barrel by 1751 GMT having tumbled as low as US$57.60 on Wednesday after US data showed a flood of fuel imports into the world's top consumer.

London Brent crude was up 35 cents at US$58.50.

"This week's Department of Energy statistics were another in a string of disasters for energy prices," analysts at PFC Energy wrote in a report.

US oil prices have fallen to their lowest level since late December. The drop, precipitated by building fuel stocks, accelerated as investment funds took their cash.

Oil is already a long way from its US$70 a barrel record high hit at the end of August, and analysts say prices could fall further still.

"Fundamentals right now are bearish. Supplies are building really quickly," said Alexandre Kervinio, an analyst at SG Commodities in Paris. "The trend is definitely to be lower, at least going into the second quarter."

Strong demand from the United States and the fast-growing economies of China and India have helped fuel a rally that lifted the oil price from US$32 at the start of 2004.

But in the past week the International Energy Agency and Opec have both trimmed their demand growth forecasts as persistently high prices make themselves felt.

Venezuelan Energy Minister Rafael Ramirez said he believed Opec was overproducing by one million barrels per day and should consider trimming output. The group next meets on March 8.

WILD CARDS

The potential for export disruptions from Iran and continuing unrest in Nigeria's oil rich delta could easily turn the market around.

The Nigerian military launched a helicopter gunship attack on targets in the delta on Wednesday and militants threatened to shoot down aircraft unless military flights stopped.

Last month, attacks on Nigeria's oil industry halted 10 per cent of output from the world's eighth biggest oil exporter.

Opec's second biggest oil producer Iran remains at odds with the United Nations atomic watchdog. French Foreign Minister Philippe Douste-Blazy said on Thursday Iran was pursuing a clandestine military nuclear programme.

But until these possible disruptions become reality, investors are firmly focused on the here and now.

"Unless there is a blow-up in the Middle East or there is some real physical demand -- but that looks unlikely now -- we would expect pressure to continue," said an international fund manager who declined to be named.

Dariusz Kowalczyk, senior investment strategist at CFC Securities, was more bullish.

"I'm surprised that we are at current levels, because the geopolitical uncertainties haven't changed much since oil was at about US$68-69 in late January -- Iran is still carrying on with nuclear testing," he said.

Scheduled maintenance at US refineries would reduce petrol output, according to Craig Pennington, an analyst at investment bank Schroders.

"We are waiting for an adjustment, but the adjustment will come," he said.

- REUTERS