Oil prices held below $60 on Tuesday as mild temperatures in the US Northeast and Japan limited demand for heating fuel. US crude edged 2 cents lower to $59.74 a barrel, after hitting a three-month low on Monday and ending $1.46 down. London Brent crude was 3 cents lower at $58.07 a barrel.
Demand for heating oil in the United States is expected to be about 30 percent below normal this week as temperatures in the US Northeast warm up after chill, according to the US National Weather Service.
A slow start to winter in the US Northeast the world's biggest heating oil market would compound worries that historically high energy costs are cutting into demand.
"There's no demand for cooling and heating demand is not there yet heating oil and natural gas prices are extremely high and people are doing their best to take it easy at the beginning of the winter season," said John Brady at ABN Amro in New York.
The most recent figures from the US Energy Information Administration show fuel demand in the world's largest energy consumer lagging more than 2 percent below a year ago.
Further direction on fuel inventories and demand will come from US government stock data on Wednesday, forecast by analysts in a Reuters poll to show a build of 2.2 million barrels per day (bpd) in crude stocks last week but a 0.8 million barrel fall in distillates, including heating oil.
In Japan, the world's third largest oil consumer, where kerosene buying can soar for winter heating, the country's fourth biggest refiner, Cosmo Oil, revised down its planned November production due to weaker kerosene and industrial demand.
Japanese kerosene stocks are at a two-year high.
Analysts still worry that a freezing winter in the northern hemisphere would come at a difficult time for the US oil industry, with Gulf of Mexico refiners and producers struggling to restore operations after being battered by hurricanes.
Lost heating oil and gas output have led to concerns that Americans could run short of heating fuels in a winter cold snap. "We believe demand could be very strong for oil products as we head into winter, because of high natural gas prices," said Deutsche Bank in an energy report.
Repairing all the damaged rigs, platforms and pipelines in the Gulf of Mexico damaged by hurricanes Katrina and Rita will take up to a year and crude oil output will not return to normal until the end of March, US Interior Secretary Gale Norton said last week.
The US Minerals Management Service said 54.27 percent of the region's 10 bcfd of natural gas output and some 67.72 percent of the Gulf's 1.5 million-bpd of crude production remained shut on Monday, as output recovery remained at a crawl.
Onshore, four refineries remained completely shut after the hurricanes, amounting to just over 1 million-bpd of processing or 6 percent of US capacity.
Oil traders are also closely monitoring Europe's largest refinery, Royal Dutch Shell's Penis plant in Rotterdam, after workers launched a strike on Monday that meant it started to scale down production at some units.