Oil: Prices climb above US$60

LONDON - Oil prices climbed above US$60 a barrel on Thursday, supported by indications of US economic strength and as the market rebounded from losses triggered by mild weather that has depressed demand for heating fuel.

New York's light crude oil contract was 65 cents higher at US$60.40. Brent was 52 cents firmer at US$58.90.

US crude prices have fallen more than US$10 from a record of US$70.85 touched at the end of August as the market has focused on signs high prices have eroded demand.

But on Thursday, US retail chains reported stronger than expected October sales, partly as a result of easing petrol prices, while testimony from US Federal Reserve Chairman Alan Greenspan eased worry about rising inflation and interest rates.

Analysts said that in the near term prices would probably remain under pressure because of unusually mild weather, but they did not expect them to fall far.

"There is a lot of strength at US$60," said Deborah White of SG Commodities in Paris. "We have tilted above and below that level for for days now and so long as the weather holds mild, we will drift down, but I'm not expecting a freefall." Heading into the peak demand winter season, temperatures in Europe, Japan and the United States have been above normal, but White said underlying concern heating oil stocks could fall short would resurface as soon as the weather got colder.

In trade on Wednesday, the price of US crude fell below US$59 for the first time since July after data showed a growing surplus of crude and a steady rise in petrol stocks.

Heating oil inventories fell by a million barrels, but they remained seven per cent higher than a year ago.

The market has also been monitoring natural gas storage data.

On Thursday, US data indicated a 29 billion cubic feet (bcf) rise in storage. The figure was mildly bullish when compared with analyst expectations of a 33 bcf rise.

Following damage inflicted by the most active Atlantic hurricane season on record, Gulf of Mexico natural gas production is running at around half its capacity, which traders fear could increase the pressure on heating oil supplies.

US refining capacity was also still recovering from hurricane damage, but in Europe product supplies looked easier following news a strike was over at Shell's 418,000-barrel-per-day Pernis refinery, the largest in Europe.

- REUTERS