Oil fell below $ 65 yesterday, extending losses as Washington stood ready to tap its emergency oil stockpiles to prevent a winter fuel shortage in the world’s biggest consumer. The decline was limited, however, by the slow recovery of hurricane-battered US refineries in the Gulf Coast and disruptive strikes by oil workers in France.

US crude oil dropped 87 cents to $ 64.60 a barrel by 0941 GMT, after falling by 77 cents on Monday. London Brent crude was down $ 1.05 to $ 61.75. US Energy Secretary Sam Bodman said on Monday the Bush administration was willing to use emergency stockpiles of crude and heating oil, if needed, to avert a fuel crunch.

“We are prepared to do what is necessary with respect to strategic reserves,” Bodman said, referring to the Strategic Petroleum Reserve (SPR) and the Northeast Heating Oil Reserve, the country’s only stockpile of refined fuels.

The US government has already sold some crude from its SPR as part of a global inventory release coordinated by the International Energy Agency (IEA) nearly a month ago.

The Paris-based IEA is in touch with US officials on whether more supplies are needed, but refiners have turned down offers of extra crude supplies. European and Asian members of the West’s energy watchdog hold large stocks of oil products, unlike the United States. The head of US supermajor ExxonMobil underscored yesterday that refiners were not running short of crude.

“Out of crude that was made available, only a third of it was actually picked up by the industry,” Exxon President Rex Tillerson told Reuters in Moscow. “I think that’s an indication that the crude supply is not a particular issue other than maybe to solve a specific refiner’s situation beause of his location problem.” The prospect of Washington tapping its 2 million-barrel Northeast fuel reserves helped cool prices on Monday, sending heating oil down 2.3 percent, driving the complex’s losses.

Prices were down another 1.24 percent yesterday to $2.055 a gallon. Worries over supply outages have been partly offset by signs that record-high fuel prices may be undermining oil demand and consumer confidence, hinting at a slowdown in the rapid pace of growth that has fuelled the market’s rally.

US retail price for gasoline jumped to the third-highest level ever and diesel fuel soared to a record high, US government figures showed.

Analysts said the market remained anxious over the pace of post-hurricane recovery in the Gulf of Mexico, the heart of the US oil industry. In the United States, the world’s largest oil consumer, a dozen refineries accounting for 18 percent of capacity remain shut after Hurricanes Rita and Katrina. This equals a daily loss of more than 1.3 million barrels of gasoline.

Washington said last week up to 15 percent of US refining capacity could be out for at least another couple of weeks. Crude and gas output from the Gulf of Mexico, home to more than a quarter of US domestic output, may also be slow to return. As of Monday, 93 per cent of crude production and 75 percent of natural gas output was shut in the Gulf of Mexico.

Supplies are also being hit by several strikes in France, where the french trade union (CGT) said yesterday’s operations at five of top refiner Total’s plants had been cut by 40 percent.

A spokesman said none of the refineries, with a combined refining capacity of 760,000 barrel per day (bpd), have been shut down. But Total’s sixth and largest plant, the 328,000 bpd Gonfreville refinery in Normandy, has been closed for more than a week due to an industrial dispute over wages.