Oil: Prices hit US$62 as chill boosts heating fuels

NEW YORK - Oil prices surged above US$62 a barrel on Tuesday as chilly weather in the United States boosted heating fuels, and a power outage at the largest refinery on the East Coast reignited supply worries.

US light crude CLc1 ended US$2.12 higher at US$62.44 a barrel, following a loss of 31 cents on Monday. London Brent crude LCOc1 rose US$2.00 to US$60.24.

The rise came as chilly weather in Texas and along the Eastern seaboard triggered a 10 per cent spike in US natural gas prices and a 5 per cent jump in heating oil.y firing up home furnaces.

Adding to strength, ConocoPhillips said on Tuesday that its big oil refinery in Linden, New Jersey, experienced a power interruption that triggered a plant-wide shutdown.

The company could not say how long the 263,000-barrel-per-day refinery would remain out of service.

The refinery problem added to a pile of US energy production troubles in the wake of a parade of severe hurricanes in recent months.

As of Tuesday, 69 per cent of the Gulf of Mexico's 1.5 million bpd of crude production capacity was shut along with 56 per cent of the region's 10 bcfd of natural gas production, according to the Minerals Management Service.

That reflects a deterioration from last week, after Hurricane Wilma threatened the region and triggered precautionary evacuations.

Since Aug. 26, hurricanes shut 68.55 million barrels of crude output -- nearly three-and-a-half days of total US consumption -- and 348.093 billion cubic feet of natural gas output.

On shore, four US oil refineries remained completely shut in the aftermath of hurricanes Katrina and Rita, accounting for 1.03 million bpd of fuel production, or 6 per cent of the nation's capacity.

At the height, the hurricanes cut as much as 25 per cent of the nation's refining output.

With the Atlantic basin hurricane season winding down next month and Wilma far from rigs and refineries, dealers were looking ahead to Wednesday's US inventory figures for insight on the state of consumption.

"The current trend is demand destruction. Nobody knows whether that is right or not. We're looking for any evidence demand destruction is the case," said Deborah White, senior energy analyst at SG Commodities in Paris.

A survey at the end of September found that increases in fuel prices and the prospect of higher energy bills have affected consumers' spending, New York-based NPD Group said.

In the survey, 69 per cent of the 41,400 consumers polled said they were driving less frequently and 42 per cent planned to curb the distance they drive.

That may lend more credence to previous US data showing oil product consumption down 3 per cent from last year, although many analysts remain wary of the figures and contend that demand has been largely undeterred by record-high prices.

US distillate stocks - heating oil and diesel fuel - are expected to have fallen by 800,000 barrels in the week ended Oct. 21, a Reuters survey of analysts showed.

US crude stockpiles, however, were likely to have risen by 1.9 million barrels due to heavy imports, marking a third successive weekly increase, the survey found.

"Prices are expected to be well supported into the winter," BP Group Chief Executive John Browne said on Tuesday.

"Oil product stocks and anticipated recoveries in refining capacity generally are adequate to meet current demand but the situation remains finely balanced and vulnerable to further disruptions or a colder-than-normal winter," he added.

BP said its giant Thunder Horse oilfield in the Gulf of Mexico, initially expected to start this year, would not start up until the second half of 2006 due to hurricane damage, a much bigger delay than analysts had anticipated.

- REUTERS