Newswires reported that oil prices fell
2.4 percent on Tuesday as the energy industry showed signs of recovery in the wake of Hurricane Katrina and industrialized countries prepared to tap emergency supplies to avert a crunch.
U.S. crude CLc1> settled down $1.61 to $65.96 a barrel, below last week's peak $70.85. Hurricane Katrina slammed
into the Gulf Coast early last week, shutting down nearly all U.S. offshore crude oil production and paralyzing more than 10 percent of refining capacity in the world's biggest fuel consumer.
But the industry's desperate push to recover has begun to pay dividends, as nearly half of the refineries fully or partially closed by the storm returned to service and offshore operators made strides to restore production.
The United States began an auction on Tuesday for crude from national reserves for refiners struggling for feedstock after Katrina shut down most Gulf of Mexico production and closed major pipelines.
This comes as part of the International Energy Agency's total release of 2 million barrels per day (bpd) over the next 30 days, the first time the IEA has tapped its members' 1.5 billion barrel government stocks since 1991.
It is still not clear how much of the IEA release will comprise oil products such as gasoline, coming as U.S. retail price increases worry motorists and businesses.
"The release of strategic reserves contains a very large component of unneeded crude oil, and does little to directly impact on the actual supply gap of U.S. oil products," said a report by Barclays Capital.
"We are now putting the expected cumulative loss of U.S. gasoline output at about 60 million barrels."