Oil eased further on Monday as investors continued to weigh evidence of demand destruction against lost energy supplies from the Gulf of Mexico and strike-hit French refineries ahead of winter.
US crude oil futures settled down four cents to $61.80 a barrel, after briefly dropping to a 10-week low of $60.35. London Brent crude was off 43 cents at $58.78.
Prices tumbled about $5 a barrel last week after US government data showed lower gasoline demand in the United States, the world's top energy consumer.
"The financial markets appear to be betting that demand has slowed and supply is coming back on," said Richard Batty of Standard Life Investments.
"There are some signs that high oil prices are making consumers adjust the way they spend money and that will affect demand at the margin. But, underlying demand in the US economy is pretty robust."
Some analysts say the oil lost from storms in the US Gulf and French strikes outweighs any erosion in consumption.
But rather than fret over potential petrol shortages, dealers focused on apparent destruction of demand. NYMEX unleaded gasoline futures posted the steepest declines, falling 2 percent to 1.791 cents a gallon.
"The surge in motor gasoline prices has been phenomenal ... and has resulted in a temporary demand contraction of about 3 percent or 320,000 bpd," said a Merrill Lynch report.
"On the other hand, we estimate that long-run US gasoline demand has only dropped by about 30,000 bpd."
An analyst for the US Energy Information Administration told Reuters on Monday that the government would likely drop its US and global energy demand estimates in a report to be released Thursday.
"I would expect (demand) to be lower ... than what we were saying before," said Doug MacIntyre, EIA analyst.
Oil traders say prices have also been pressured by the West's readiness to use government-held strategic inventories to offset lost crude and fuel output.
But signs of weaker demand have eased the need for extra emergency oil aid, said the head of the International Energy Agency (IEA), which initiated a 60 million-barrel release of member inventories a month ago.
Strikes in France have compounded global fuel supply woes, coinciding with refinery outages in the US Gulf Coast after hurricanes Katrina and Rita.
Nine US refineries with nearly 2.4 million barrels of daily processing capacity remain shut in the wake of the storms, amounting to about 14 percent of US fuel production, according to a Reuters survey of company operations.
Although commercial heating oil inventories are at the top of the range for this time of year, the stage is set for a price spike.
"If the winter is really severe it could push up demand, causing prices to rise," said Batty. "This will be just at the time when the US economy could be accelerating as hurricane-related spending comes through."
SINGAPORE: Oil prices held steady on Monday, as worries over weaker US fuel demand balanced the continued loss of supplies from the Gulf of Mexico and strike-hit French refineries.
US crude oil futures were unchanged at $61.84 a barrel, after settling 48 cents higher on Friday. London Brent crude eased 6 cents to $59.15 a barrel.
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