Crude-oil prices rose slightly on Friday after dropping more than US$2 a barrel a day earlier, as markets reevaluated how the thwarted trans-Atlantic airplane attacks might dampen jet fuel demand and consumer confidence.
It capped a week of huge price swings in the energy markets. The announcement late on Sunday that BP would lose production out of its Alaskan pipeline caused prices to soar, and Thursday's news of the foiled terrorist plot cause them to tumble back.
Cameron Hanover analyst Peter Beutel characterized Friday's oil markets as "exhausted, and applying bandages: there was a lot of money made and lost this week."
Markets on Friday also took note of the monthly report from the International Energy Agency, which cut its global oil demand growth estimate amid shrinking demand in developed industrialized nations.
Light, sweet crude for delivery next month rose US$0.35 to settle at US$74.35 on Friday on the New York Mercantile Exchange -- below last Friday's settlement of US$74.76 a barrel, despite soaring above US$77 earlier this week.
September Brent crude on the ICE Futures exchange climbed US$0.35 to settle at US$75.63.
Thursday's price drop of more than 3 percent to the lowest settlement price since July 28 came after British authorities said they had stopped a terrorist plot to blow up several aircraft in flight between Britain and the US.
Lawrence Eagles, head of the IEA's oil industry and markets division, told Dow Jones Newswires that the demand outlook hadn't factored in the potential impact of the airline terror plot.
"It's far too early to make a definitive call on this," Eagles said. It will be important to gauge the psychological impact, he said, and "if it does cause a reduction in air travel, it'll impact" jet fuel, "which is the tightest part of the product spectrum."
After the plot was revealed, markets expected a drop in air traffic volume, and consequently less demand for fuel.
"Undoubtedly this knee-jerk reaction was overdone and many traders are taking the opportunity to re-establish long positions as focus returns to the Prudhoe Bay outage," said Paul Harris, head of energy and emissions at Bank of Ireland Global Markets.
Gasoline futures rose US$0.07 to settle at US$2.0643 a gallon after closing on Thursday at their lowest price since finishing at US$1.9766 on April 7.
Heating oil futures rose US$0.0156 to settle on Friday at US$2.0406 a gallon, while natural gas futures fell US$0.26 to US$7.269 per 1,000 cubic feet.
BP announced late on Thursday that it will try to keep part of its North Slope production running while replacing corroded pipes that have caused two spills this year.
But federal regulators ordered the company to conduct more rigorous inspections to continue operations, and BP must pass a series of tests before restarting pipes it shut down. BP plans to decide next week on whether to maintain flows from the western part of the field.
The IEA said net crude oil losses following BP's problems at Prudhoe Bay will be lower than expected, and that Saudi Arabia and industry-held stocks could offset these.
"For the time being, the market can cope with current outages," the IEA said in its report. "While Prudhoe Bay represents a significant outage, there are potential offsets, from Saudi Arabia, the US [Strategic Petroleum Reserve] and above-trend refiner stocks."