Crude oil prices rose almost 3 percent Tuesday on concerns that last month's sharp drop in gasoline demand would be temporary and that the supply of transportation and home-heating fuels would remain tight well into 2006.
Analysts are particularly worried about the pace of recovery for offshore oil and natural-gas drilling and onshore oil refining in the aftermath of hurricanes Katrina and Rita.
Light sweet crude for November delivery climbed $1.73 to settle at $63.53 a barrel on the New York Mercantile Exchange, where unleaded gasoline futures rose 3.26 cents to settle at $1.8332 per gallon.
The Paris-based International Energy Agency on Tuesday said it anticipated some moderation in the September decline in gasoline demand, which it blamed on retail price spikes and sporadic supply shortages that followed Katrina and Rita. The hurricanes barreled through the Gulf of Mexico and slammed facilities in several states along the coast.
The energy watchdog for industrialized nations said "October should be less affected as logistical disruptions subside." The IEA also highlighted the prolonged loss of oil production in the Gulf of Mexico, saying output in non-OPEC supplies in 2005 and 2006 would fall by 300,000-400,000 barrels per day.
While refineries along the Gulf Coast are slowly returning to service, plants accounting for almost 3 million barrels per day of gasoline, heating oil and jet fuel production remain shut or are operating at reduced rates. And, as of Tuesday, 70 percent of daily oil production and 60 percent of daily natural-gas production in the Gulf of Mexico was down, according to the federal Minerals Management Service.
Adding to Tuesday's buying were concerns about higher-than-normal demand for home-heating fuels. Accuweather.com said in its 2005-2006 winter forecast that "colder-than-normal temperatures" were expected over the northeastern U.S., which consumes most of the country's winter heating fuel.
Nymex heating oil futures rose 4.61 cents to settle at $2.0179 a gallon, while natural gas futures jumped 54.4 cents to settle at $13.519 per 1,000 cubic feet, reported AP.