Oil Cuts Losses With Help From Natural Gas Rally, Refinery Fire

Oil rebounded from morning lows to finish only slightly down on the day as a strong finish in natural gas futures and a Canadian refinery fire lifted crude futures back near $58, traders and analysts said.

On the New York Mercantile Exchange, March crude settled down 1 cent at $57.99 a barrel, trading from $56.62 to $58.51.

A fire at Imperial Oil's refinery in Nanticoke, Ontario, cut production at the 118,000 barrel-a-day facility but the amount of lost output was unknown.

The fire broke out in the refinery's crude processing unit this morning and was put out in about two hours, according to spokesman Pius Rolheiser.

It is the second fire at an Imperial refinery in two months. In mid-December, an explosion and fire destroyed a hydrocracking unit at the company's 120,000 barrel-a-day Sarnia, Ont. refinery.

Imperial is 69.6% owned by Exxon Mobil .

Crude prices also got support from a rally in natural gas, which surged more than 24 cents from its low of $7.05 this morning to settle at $7.292, up 5.1 cents on the day.

Early pressure came as meteorologists predicted a break next week in the frigid weather that has slammed the U.S. Northeast, ushering in milder temperatures that could last into March.

Forecasters said milder temperatures could continue into March, when the Northern Hemisphere winter ends.

"We expect to see a turn to more moderate temperatures beginning in the later part of next week," said Mike Palmerino of forecaster DTN Meteorlogix. "The last 7 days of February we expect to see temperatures returning to more normal levels in the Northeast."

Crude prices fell more than $1 on Wednesday, after government data showed U.S. distillate stocks, including heating oil, had declined less than analysts had expected.

An unusually mild start to winter in the Northeast helped to push U.S. crude prices to a 20-month low of $49.90 on Jan. 18. Although prices have since recovered, their rise has faltered around $60 a barrel.

"The market is still consolidating," said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc. "It was unable to find any follow-through above $58."

Some analysts have said the market lacks the momentum to go higher and will probably stay volatile and rangebound.

Data from the U.S. Energy Information Administration Thursday showed inventories of natural gas fell by 259 billion cubic feet last week, just shy of the record draw of 260 bcf set in January 1997. Analysts had forecast a 252 bcf draw.