LONDON (AFP) - World oil prices clawed back from heavy losses as worries about tight winter supplies in the United States resurfaced despite a rise in crude oil stockpiles.
New York's main contract, light sweet crude for delivery in December, fell to as low as 51.29 dollars, down seven percent from Tuesday's joint-record closing high of 55.17 dollars.
But US crude futures later pared losses to stand at 52.30 dollars a barrel in late morning deals, down 16 cents from the previous close.
In London the price of Brent North Sea crude oil for delivery in December also rebounded from its lows of the day to stand at 49.25 dollars in late deals, a drop of 20 cents.
"The oil price has bounced back from the very low levels we've seen. The question is now whether there is going to be recovery," said Prudential Bache broker Christopher Bellew.
It was "hard to say" whether that would happen, he said. "But we are seeing some support coming at these low levels."
News that China's central bank is to raise interest rates for the first time in nine years hit the prices of some commodities amid concerns the move could reduce the Chinese economy's voracious appetite for raw materials.
But traders said the announcement did not appear to have affected crude prices significantly.
"In theory it could reduce demand from China, so it is bearish. But I don't think it is a factor," said Bellew.
World crude oil prices began plummeting Wednesday following news of a 4.0-million-barrel weekly surge in US crude oil stockpiles that calmed market fears of a supply crunch during the northern hemisphere winter.
"With crude stocks having built up last week, it means that US refiners are in a good position to cope with the winter demand on heating oil," Deutsche Bank analyst Adam Sieminski said.
The crude rise eclipsed news that heating oil inventories, in high demand in the northern hemisphere winter, slipped 600,000 barrels to 48.9 million.
New York's benchmark contract plunged 2.71 dollars, or 4.9 percent, to close at 52.46 dollars a barrel Wednesday, a three-week low.
But some analysts were taken aback by the market's reaction and said prices were likely to resume their upwards march. Others were less bullish, however.
"The data which appear to have been the trigger for the fall don't really justify the market's response in our view," said Barclays Capital analyst Kevin Norrish.
"If anything it showed a tighter picture for distillate and heating oil. The problems in the US Gulf of Mexico suggest that we are going to get very low production for quite a long time until 2005," he said.
World oil prices have surged by about two-thirds since the start of this year, driven by strong demand, notably from China, as well as global supply strains and fears of disruption in major producers such as Russia and Nigeria.
Adjusted for inflation, however, prices remain well below the levels reached in the wake of the 1979 Iranian revolution when prices surged beyond the equivalent of 80 dollars a barrel in today's money.
Daniel Hynes, an energy strategist with ANZ Bank in Melbourne, said the market "may be at the start of a downward trend which will head towards a price based more on fundamentals than what has been in the past."
"If it falls below 50 dollars in the next week or two, we could see some further falls. But we've seen in the past that there's plenty of support at that level, so 50 dollars is a critical test."
However, Norrish predicted markets would snap back.
"I expect prices to come back strongly and probably exceed the levels to which they've already risen. We still expect to see fresh highs," he said.
10/28/2004 - 17:54 GMT - AFP