Oil prices fell sharply Wednesday as cooler demand for gasoline offset a drop in US crude stockpiles following supply disruptions caused by hurricanes Katrina and Rita, analysts said.
New York's main contract, light sweet crude for delivery in November, shed 1.11 dollars to close at 62.79 dollars a barrel. In London, the price of Brent North Sea crude for November delivery fell 1.10 dollars to 60.12 dollars a barrel.
"Increased volatility keeps the energy markets playing games," said John Person, president of National Futures Advisory Service, after the US Department of Energy reported falls last week in stocks of crude, petrol (gasoline) and heating oil.
Person said some traders felt the declines in the US inventories "may be revised and others feel the repairs on (refineries) will occur sooner rather than later", which would tend to depress prices as supplies resume.
Price pressure was intensified by speculation that "more imports and relaxed regulations (in the United States) may open the door for more imports of refined products", he added. The Department of Energy said crude stocks were down 300,000 barrels at 305.4 million barrels in the week to September 30.
Gasoline inventories dropped 4.3 million barrels to total 195.5 million, the DoE said. Distillate supplies used for diesel and heating oil dropped 5.6 million barrels to 128 million. Demand for gasoline was 2.6 percent lower than a year earlier, the figures showed.
The DoE added that US refineries were operating at only 69.8 percent capacity in the week to September 30, against 86.7 percent the week before, after Rita struck the Texas and Louisiana coast on September 24.
US refineries were already struggling with the aftermath of Hurricane Katrina, which swept through the Gulf Coast at the end of August.
With the northern hemisphere winter fast approaching, concerns are growing that supplies of products like heating oil could be tight and that may trigger another run-up in crude prices.
Alaron energy trader Phil Flynn said the "outlook for the rest of this year is still quite bullish".
He said: "With gasoline supplies hovering at extremely low levels and manufacturers looking for distillates, petroleum products should make another run as soon as they start to solidify the bottom."
Crude futures had slumped by more than a dollar on Tuesday as speculators bailed out on signs the United States might release more emergency stockpiles of crude.
US Energy Secretary Samuel Bodman had said that three million barrels a day of refining capacity remained offline because of the hurricanes, and two to four weeks might be needed to bring capacity up to normal.
Bodman said on Monday the United States was "prepared to do what is necessary with strategic reserves" after the government tapped its emergency stockpiles in early September after Katrina struck.
Other US government figures published Wednesday showed that 87 percent of oil production and 69 percent of natural gas production in the Gulf of Mexico remains shut down. That is a slight improvement on Tuesday's figures.
Katrina and Rita destroyed 109 oil platforms and five drilling rigs in the Gulf but only a small portion of production will be lost for good, US Interior Secretary Gale Norton said Tuesday.
The storms also caused extensive damage to another 50 platforms and 19 rigs.
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