Oil rises above $58, all eyes on hurricane

Oil prices bounced back above $58 a barrel on Friday, recovering from deep losses during the previous session, as traders kept a nervous eye on the latest hurricane to threaten key US offshore facilities. US light sweet crude for August delivery ended up 29 cents at $58.09 a barrel on the New York Mercantile Exchange, after Thursday's decline of more than $2 to the lowest closing price in two weeks.
London Brent crude for September delivery was 65 cents higher at $57.61 a barrel on the International Petroleum Exchange.
"The only really bullish point is weather-related fears about the supply of crude and products in the US Gulf Coast," said Colin Tang, senior oil trader at French investment bank Calyon. "People are definitely scared of being short."
Hurricane Emily, the fifth named storm of the Atlantic season, left Opec-member Venezuela's oil sector unscathed, but some weather forecasters said it could still affect US offshore oil and gas production.
They said the hurricane would likely cross the northern tip of the Yucatan Peninsula and make landfall near the Texas-Mexico border, a more northerly track than earlier predicted, which could impact platforms and onshore refineries.
Last week's Hurricane Dennis briefly shut most oil and gas output and prices rose to a record high of $62.10 a barrel, but production has since recovered.
Gains were tempered after US data this week showed a bigger-than-expected increase in stocks of distillates, the high-demand fuel group that includes heating oil and diesel.
Stockpiles that were pulled to below-average levels by exceptionally robust summer demand were back in the upper half of their average range, the US government said.
This should give traders more confidence about refiners' ability to meet demand this winter, when consumption spikes in Northern Hemisphere countries, although many still worry about tightness in refining capacity.
Crude stocks fell by 3.9 million barrels, more than forecast, but remained near the top end of their average range, the report showed.
Market bulls were also unnerved this week by a downgrade in oil demand expectations by the International Energy Agency, an energy watchdog for 26 industrialised nations.
The IEA cut its growth forecast this year by 200,000 barrels per day to 1.58 million bpd as high prices were expected to curb consumption in China and the United States, whose expansion last year helped to drive prices beyond $50 a barrel for the first time.