A deadly explosion at BP's huge refinery near Galveston, Texas, stemmed a recent fall in oil prices triggered by a firmer dollar and rising US crude stocks.
US light crude rose 44 cents to $54.25 a barrel, after falling more than $3.50, or 6 per cent, in the previous two sessions. Brent crude oil futures were up 56 cents to $53.60 a barrel.
The blast has spurred fears about whether refiners - already running near full throttle - will meet growing gasoline demand this summer, when summer vacation driving demand peaks.
"Given the abject lack of spare refining capacity, especially at this time of year, a strong reaction should be expected," said Fimat USA bank in a report.
The explosion at the 71-year-old refinery killed at least 15 people and severely damaged some refining equipment at the nation's third-largest oil refinery, raising the specter of litigation, regulatory problems and costly reconstruction bills.
"There will be worker's compensation issues for both lost time and medical costs," said Christopher Guidette, a vice president at ISO, which provides analysis and support to help insurers manage and assess risk.
Other risk analysis sources who declined to be identified said damage to the refinery and potential litigation could put the costs of the incident over the billion dollar mark, though no detailed damage assessments are yet available.
BP officials said the explosion happened in an isomerization unit, which boosts octane content in gasoline.
Sources with knowledge of the refinery, which can process 470,000 barrels per day of crude oil, said the explosion occurred near other units already shut for maintenance work.
BP chief executive officer John Browne said the incident reduced gasoline production from the refinery by no more than 5 per cent.
The refinery accounts for 3 per cent of US gasoline output.
At least 15 people were confirmed dead as a result of the blast, all contract workers for JE Merit, a subsidiary of Jacobs Engineering Group Inc.
Insurance will cover some of the damage, but it's too early to tell how much, according to insurance experts.
Oil prices have fallen from last week's record peak of $57.60 a barrel, pressured by a rebound in the dollar following the Federal Reserve's move to increase interest rates this week.
Oil has risen around 25 per cent this year as dollar weakness encouraged funds to switch money out of treasury markets and into commodities.
Worries over inflation have also emerged as the government said on Wednesday that a big jump in energy costs pushed US consumer prices up 0.4 per cent in February.
Treasury Secretary John Snow said on Wednesday he was unhappy with current oil prices but they would not derail the US economy.
"They're not of the sort that... are going to knock us out of the recovery we are in now, but they are certainly unwelcome," Mr Snow said.
Oil has soared more than $10 since the start of the year and is up over 45 per cent from a year ago, with galloping demand from China and the United States stretching global output and refining capacity. - (Reuters)
