Oil: Slide in price comes to an end

LONDON - Oil prices ended a slide on Friday as the market sought to balance weakening fuel demand in the world's top consumer, the United States, against lost supplies of petrol and heating oil from US and French refiners.

Washington's readiness to use emergency oil reserves this winter has helped drag prices US$5 lower this week, although they are still 42 per cent higher than the start of the year.

US crude settled up 48 cents at US$61.84 a barrel after a five-day losing streak. Prices are now nearly 13 per cent below their all-time high of US$70.85 struck late August.

London's Brent crude was up 84 cents at US$59.21.

Prices fell this week after US data showed the world's top consumer was burning less petrol and other fuels.

"The realisation is coming that high prices have finally started to hurt demand. We're coming down to levels that don't look so overvalued," said a senior oil trader in London.

"The price now is more like what it's worth." But some analysts are not so convinced that consumption is on the decline.

"I don't buy the collapse in demand argument at all," said Mark Keenan of the London-based MPC Commodity Fund.

"People are very much using lower refinery utilisation rates and higher imports to support the argument that demand is lower. And that's incorrect. I don't think refinery utilisation is an accurate measure of demand." US refiners worked at only about 70 per cent of capacity last week, the lowest since the government started keeping weekly records in 1990, causing fuel stocks to fall sharply.

With 10 US refineries still shut after hurricanes and Gulf of Mexico gas output way down, few US consumers can look forward to the winter with confidence.

By Thursday, 14 per cent of US capacity remained closed due to Katrina and Rita, along with 80 per cent of offshore Gulf of Mexico production.

Strikers in France have closed the country's biggest refinery and blockaded a key Mediterranean oil port, threatening the shipment of fuel across the Atlantic.

Oil traders say prices have also been put under pressure by the West's apparent readiness to use government-held strategic inventories to offset lost crude and fuel supplies.

The head of the US Energy Information Administration (EIA) said a price trigger that would allow the government to tap into heating oil stores could also be met next week.

The Japanese government said on Friday it would extend a cut in its minimum requirement for private oil stocks until early November, giving refiners more time to draw down inventories.

- REUTERS