TOKYO, Nov 8 (Reuters): Oil prices held steady below $60 today as unseasonably mild weather dampened demand for heating oil and was expected to lead to a rise in US fuel stocks.
US light crude oil traded up 3 cents at $59.50 a barrel, after a $1.11 drop Monday. London Brent crude was at $58.10, up six cents.
US demand for heating oil was expected to be about 42 per cent below normal this week as temperatures remain mild in the US Northeast, the world's largest oil consuming region, the US National Weather Service said Monday.
"The market is focusing on weather, which is softening product demand everywhere in the Northern Hemisphere, not just the US Northeast," said Naohiro Niimura, vice president at the derivatives unit at Mizuho Corporate Bank in Tokyo.
In Japan, the world's third-largest oil consumer where demand for heating can soar in winter months, the weather was expected to remain normal or warmer than normal in most areas for the next two weeks.
Expected rises in US oil inventories are also weighing on prices. Market sentiment has reversed after fears over product shortages in the wake of hurricane disruptions to US production helped drive prices to a record $70.85 in late August.
US crude production from the Gulf of Mexico region continued to recover slowly after hurricanes Katrina and Rita, though 51.54 per cent of the region's 1.5 million barrels per day capacity remains shut, the US government said Monday.
Traders said uncertainty about the longer-term supply and demand is preventing a sharper price fall.
In the US Gulf region, three refineries accounting for just under 5 per cent of the country's total capacity remained offline as of Monday following Katrina and Rita.
The West's energy watchdog said in its World Energy Outlook that the world's largest oil producer Saudi Arabia and other suppliers would have to spend $56 billion on rigs and refineries every year to keep up with booming demand.