Oil prices rose on Wednesday, extending this week's gains to 3.7 percent so far as investors feared a rebound in demand would drain stockpiles and spark a winter fuel crunch.
The slow recovery of hurricane-battered US Gulf refineries and rigs compounded concern. Washington said on Wednesday it would be "many months" before the US energy hub recovered completely from hurricanes Katrina and Rita.
US crude oil futures rose 59 cents to settle at $64.12 a barrel, following a rise of $1.73 on Tuesday. London Brent crude was up 49 cents at $60.57.
"The main market driver, as we head into winter heating season in the Northern Hemisphere, will be the massive outage of refining capacity in the US and the loss of 175 million barrels of output from the affected refineries," said Michael Wittner of Calyon.
The International Energy Agency, energy watchdog of the West, has said the worst was now behind world oil markets when it came to demand destruction.
Oil demand growth is on track for an even faster rate next year of 1.75 million barrels per day (bpd), up from an already strong 1.26 million bpd in 2005, the IEA said.
China, a major driver of oil demand, is expected to see growth of 600,000 bpd in 2006, up 100,000 bpd on this year, the US Energy Information Administration, the statistical wing of the US Department of Energy added in a report Wednesday.
For the United States, the world's largest energy consumer, the EIA revised its oil demand forecast downward for this year because of consumer reaction to high fuel prices, but said the decline would be temporary. It saw consumption growing 500,000 bpd, or 2.2 percent, in 2006.
Quicker growth could lead to still higher oil prices. The EIA, the statistical unit of the US Department of Energy, sees crude costing $64-$65 next year - up from $58 in 2005.
Some analysts said signs of an improving US economy, such as smaller-than-expected job loss data for September, backed a healthy US demand picture.
"The hurricanes which battered the US Gulf Coast did not have the impact on the labour market as was earlier expected," said Dariusz Kowalczyk, a Hong Kong-based senior investment strategist at CFC Seymour Securities.
But US refining and production are still on the mend.
Some 70 percent of US Gulf of Mexico's 1.5 million bpd of crude production capacity remained offline, along with 59 percent of the region's natural gas production.
The EIA said Wednesday that production from the Gulf, home to more than a quarter of US domestic oil output, will not reach normal rates until next spring. The EIA added it expects some 560,000 bpd of refinery capacity to stay shut in November, falling to 300,000 bpd in December.
"A combination of market supply and demand reactions, combined with the luck of the outages coming in a slow demand period, have allowed the system to cope better than might have been expected," said PFC Energy.
Analysts said US government stock data due on Thursday is likely to give a clearer picture on whether fuel stocks would be sufficient for winter.
A Reuters survey of analysts forecast that distillate stocks, including heating oil, would have dropped 1.7 million barrels last week, which would be a third straight week down.
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