Oil prices stemmed last week's losses to hold above $64 a barrel on Monday due to tardy supply recovery in the United States after Hurricane Katrina, but gains were limited by signs of slowing demand growth.
U.S. light crude rose 9 cents to $64.17 a barrel by 0607 GMT, after shedding 41 cents on Friday, when prices fell for the fourth time in five sessions. Prices are almost $7 below the record-high of $70.85 struck on August 30.
London Brent crude inched up 2 cents to $62.86 a barrel.
"The market can't be too bearish as they will also focus on refining capacity constraints in the Gulf of Mexico," said Sano Keiichi, a manager with Sumitomo Corp. in Tokyo, reports Washington Post.
According to Forbes, Katrina's impact on oil demand will be largely temporary, according to a report from the International Energy Agency on Friday.
"Regional oil-product demand will be seriously affected in the near term, but this will be offset by fuel needs for rescue/recovery and rebuilding efforts," the report said.
Still, it has reduced its Gulf of Mexico supply forecasts by 140,000 barrels a day in 2005 and by 55,000 barrels a day in 2006.
The IEA also reduced its worldwide 2005 demand growth forecast by 250,000 barrels a day to 1.35 mln pegging global consumption at an average of 83.48 mln barrels per day.
The most robust political threat to the oil industry came from Thierry Breton, French finance minister, whose promise to bring the French deficit below the EU limit of 3 per cent of GDP in 2005 could also be boosted by a windfall tax on oil profits.
“We do not exclude the possibility of putting to a vote in parliament an exceptional tax corresponding to an exceptional situation,” Mr Breton said in a television interview on Thursday night.
“I hope it doesn't come to that,” he added. “But in any case we are determined.”
Europe's finance ministers, meeting in Manchester, are expected to step up the attack today, urging the industry to increase refining capacity, and calling for transparency in the market to tackle speculation.
Jean-Claude Trichet, European Central Bank president said record oil prices were “clearly a risk” to the economy, informs Financial Times.