Oil prices rose to near $65 a barrel on Friday, after steep losses earlier in the week, as U.S. production recovered more slowly than expected after a battering from Hurricane Katrina. U.S. light crude edged 43 cents higher to $64.92 a barrel by 0503 GMT, extending a gain of 12 cents on Thursday. Prices are still down 8 percent from a record $70.85 last week. London Brent crude rose 50 cents to $63.58 a barrel. "The situation is unclear because output is still down in the Gulf of Mexico and U.S. refineries are having problems," said Tony Nunan, manager at Mitsubishi Corp.'s petroleum business. Around 900,000 barrels per day, or 60 percent of crude production, remained shut by Thursday after Katrina ravaged the U.S. Gulf Coast last week, according to the U.S. Minerals Management Service (MMS). This was up from 57 percent the previous day as MMS gained new data on the extent of the damage, reducing hopes for a quick industry recovery and offsetting U.S. government data on Thursday that showed smaller than expected falls in product inventories. The slowdown in the U.S. industry recovery underscored fears that tighter fuel supplies might last months, leading to higher energy prices in the world's top consumer in the run-up to peak winter demand. About 5 percent of U.S. oil refining capacity may remain offline for several months, after the storm shut down 10 percent of refining capacity, the U.S. energy department said. It said four refineries are likely to be down for an extended period. These help supply the pipelines that ship fuel to U.S. East Coast markets. It is unclear how easily increased gasoline imports from Europe will be put into this distribution system. The West's energy watchdog, the International Energy Agency, is co-ordinating the release of 2 million barrels per day (bpd) over 30 days in emergency stockpiles, though 1.3 million bpd will be crude rather than much needed gasoline.