Oil prices rose on Tuesday as concerns about US summer gasoline supplies after a string of refinery problems offset demand worries after a steep drop in the stock exchange of giant energy consumer China. US crude settled 7 cents higher at $61.46 a barrel, after trading as high as $62.25 and as low as $60.06 in earlier activity.
London Brent crude settled up 3 cents at $61.36 a barrel. Crude fell in early activity on concerns about the economic health of China, the world's second-biggest oil consumer behind the United States, after the nation's main stock index, the Shanghai Composite, dropped by nearly 9 percent. The fall, the biggest sell-off in a decade, came ahead of a parliament session next week rumoured to be considering higher interest rates to cool economic growth.
The decline triggered falls on other equity and commodities markets. But analysts cautioned against calling the end of Asian or world growth for commodities, sating the market had sold off too sharply. "I really think the market overreacted to the China news, but it just shows the market's sensitivity to demand coming out of China," said Phil Flynn, analyst at Alaron Trading.
Support for oil came on news of problems at BP Plc's Los Angeles refinery and two Canadian plants owned by Shell Canada Ltd and Imperial Oil Ltd. The glitches came as traders shift focus away from the Northern Hemisphere winter to the US summer, when gasoline demand peaks.
"Crude is making a comeback here, with strength supported by gasoline, which is up on stronger cash market and with 'change of season' (to gasoline from heating oil) supportive," said Andrew Lebow, a broker at Man Financial.
Oil has swung from a record $78.40 in July to a 20-month low of $49.40 last month. Prices have been spurred higher over the past week in part by Opec member Iran's refusal to halt uranium enrichment, and that remains a driving factor.
At a meeting on Monday, the five permanent members of the United Nations Security Council, along with Germany, agreed to work on a new Security Council resolution to put pressure on Iran to abandon its nuclear program.
A US State Department spokesman said the six countries would consult by phone on Thursday to start hammering out the elements of a resolution. Price gains were further driven by last week's declines in stocks of refined products in the United States and that trend is expected to continue.
Analysts polled by Reuters expect US weekly data to be released on Wednesday to show a 2.8 million barrels decline in distillate inventories, their fifth consecutive fall. Gasoline stocks - increasingly in focus ahead of the US driving season - were projected to have fallen by 1.8 million barrels, with crude inventories expected to rise by 1.9 million barrels, according to the survey.