Oil: Prices near $61 as US economy powers ahead

Oil held near $61 a barrel after data showed the United States was shrugging off high oil prices and the rapidly expanding Chinese market was burning more fuel.

Strong spending by US consumers and the government helped power faster-than-expected 3.8 per cent annual growth in the third quarter, overcoming the impact of hurricanes and oil prices that touched a record high of $70.85 in late August.

"This is a very positive, strong report and encouraging because it included Katrina and a spike in oil prices and we still just seem to have a lot of momentum going into the fourth quarter," said economist Kurt Karl of Swiss Re in New York.

Data from China revealed a 9.7 per cent jump in China's oil demand in September, the biggest leap for eight months. The surge comes after months of unexpectedly weak figures from one of the world's fastest expanding markets.

"If we are seeing China back to growth, that is another stress factor back in the oil market," said Deborah White, senior energy analyst at SG Commodities in Paris.

US crude was down 14 cents at $60.95 a barrel by 1530 GMT. London Brent crude was up five cents at $59.19.

With the northern hemisphere winter approaching, analysts and economists are divided on how much near-record prices are hurting demand in the world's top consumer the United States.

The US oil and gas industry is still struggling back from hurricanes that battered Gulf of Mexico rigs and refiners. Lost refinery output and high natural gas prices have led to concerns in some quarter that Americans could run short of heating fuel.

"We expect that 350,000 barrels per day of distillate demand will have to be rationed out of the market this winter through higher prices in order to hold demand in line with available supplies," analysts at Goldman Sachs said.

Over 1.7 million barrels per day of US refining capacity is still shut down after hurricanes Katrina and Rita, and some industrial consumers are switching to oil from costly gas.

The US Interior Department has cautioned that energy operations in the Gulf of Mexico will not return to normal until late March next year.

Deutsche Bank wrote: "We continue to believe the market is under-estimating the persisting refineryand production problems post Katrina and exaggerating the dangers of demand destruction."

A threatened strike threat at Europe's largest refinery is also hanging over the market. Workers at Shell's 418,000-bpd Pernis plant in Rotterdam have said they will walk out on Monday afternoon if there is no progress in a dispute over pensions.

A one-day strike in Belgium over government plans to raise the retirement age disrupted shipping at Antwerp port but refineries in the area were unaffected.

- REUTERS