Oil: Prices fall, refineries cause concern

LONDON - Oil prices slipped further below US$60 on Tuesday as warm weather sapped demand for heating oil, though a strike at Europe's largest refinery added to concerns product supplies could still run short.

US crude shed 61 cents to US$59.15 a barrel, while London Brent crude was down 33 cents at US$57.77.

US crude futures have fallen more than US$10 from a record of US$70.85 hit at the end of August and on Monday closed below US$60 a barrel for the first time since the end of July.

Many analysts remain bullish but predict prices will trade in a narrow range for now.

"I think the market is going to continue to be rangebound until the demand picture becomes clearer and weather forecasts become more meaningful," said Mike Wittner, head of energy market research at Calyon.

After signs petrol demand had been eroded by the late August price spike, attention has switched to consumption of heating oil ahead of winter in the northern hemisphere.

Demand for heating oil in the United States is expected to be about 30 per cent below normal this week as temperatures in the US Northeast warm up after an early chill, according to the US National Weather Service.

The most recent figures from the US Energy Information Administration show fuel demand in the world's largest energy consumer lagging by more than two per cent compared with a year ago.

For the longer term, forecasters are predicting a harsher than normal winter, just when the oil industry is struggling to recover from the impact of damage inflicted by the most active Atlantic hurricane season on record.

"It would take a very mild winter indeed to offset lost US oil product output," said Kevin Norrish, an analyst at Barclays Capital.

Refining capacity was also reduced in Europe by a strike a Shell's 418,000 barrels per day Pernis plant in Rotterdam, Europe's largest refinery.

Further information on the state of fuel inventories and demand will come from US government stock data on Wednesday.

A Reuters survey of analysts predicted a build of 2.2 million barrels per day (bpd) in crude stocks last week but a 0.8 million barrel fall in distillates, including heating oil.

- REUTERS