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NEW YORK: World oil prices rebounded modestly from recent falls on Thursday on news that a pipeline carrying crude from Central Asia to the West would remain shut for about 15 days after a recent explosion.
New York's main contract, light sweet crude for September delivery rose 1.44 dollars to close at 120.02 dollars a barrel.
In London, Brent North Sea crude for September edged up 0.86 cents to settle at 117.86 dollars per barrel.
"The market still possesses considerable inherent strength. Even if the argument of contracted demand is accepted, there remains enough substance to the elements that drove the six-year rally to keep prices from falling too far," said Mike Fitzpatrick, analyst at MF Global.
The Baku-Tbilisi-Ceyhan (BTC) oil pipeline will remain shut for about 15 days after a blast occurred in a pump at a section in eastern Turkey, an official from Turkey's state-run oil and gas company BOTAS told Anatolia news agency on Thursday.
British energy giant BP said it was looking at three alternative means of delivering supplies to Western clients. A spokesman also told AFP that the company had begun to limit its output.
"We have ramped down production," he said. The spokesman added that following closure of the BTC pipeline, BP was looking into transporting the oil out of Azerbaijan either by rail, a Russian pipeline as far as the Black Sea, or via a pipeline that ends in Georgia.
A fire that started on Tuesday was likely to continue burning for another two days until the oil remaining in the pipeline runs out, after which repairs would begin, the BOTAS official told Anatolia.
The BTC pipeline was inaugurated in 2006 and carries oil from the Caspian Sea fields to Turkey's Mediterranean port of Ceyhan, where tankers transport the crude to Western markets.
Despite modest price gains on Thursday, the oil market has dived lower this week on mounting concern that slower economic growth in the United States, the world's thirstiest energy guzzler, would translate into a decline in global energy demand.
The US government reported on Monday that consumer spending, which fuels two-thirds of US output, had cooled in June and inflationary pressures accelerated.
Prices extended their slide on Tuesday as signs of a slowing global economy raised further doubts about demand.
Crude futures also lost ground on Wednesday after news of a surprise jump in US oil reserves, traders said.
The US Department of Energy announced in its weekly report that American crude reserves had increased by 1.7 million barrels in the week ended August 1.
The reading caught the market off guard because expectations had been for a 200,000-barrel decline.
Traders are closely tracking the level of US gasoline stockpiles amid the ongoing peak-demand summer driving season, when many Americans normally take to the roads for their summer holidays.
Oil futures have shed about 20 percent in value since hitting record highs above 147 dollars per barrel on July 11.
"Overall, the market remains at a crossroad. Market participants are torn between persistent fears over slowing energy demand and potentials for further supply disruptions," said Sucden analyst Andrey Kryuchenkov. - AFP/de
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