Crude Oil Rises as Senate Passes Bailout Plans

As the U.S. Senate passed a $700 billion financial-rescue package, crude oil rose by $1 a barrel but erased earlier gains as concerns remained over weakening demand and growing supplies in the U.S.

The Senate passed legislation that links the rescue plan to an increase in bank-deposit-insurance limits and $17 billion in tax breaks for solar power, wind energy and heavy oil refineries. The legislation is aimed at aimed at limiting a slowdown of economic growth in the world's biggest energy-consuming nation. The House of Representatives may take action Oct. 3, said Brendan Daly, a spokesman for House Speaker Nancy Pelosi.

“With the bailout passing, people feel that maybe the market will stabilize, the economy will be rescued and crude prices will go up,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “This removes some of the uncertainty, but the big problem is going to be the House.''

The package for Wall Street, which has yet to be approved by the House of Representatives, rekindled hopes that the credit crisis can be eased, but traders and analysts said the supportive impact would be limited as eyes remained on falling demand.

U.S. light crude for November delivery rose $1.03 to $99.56 by 0229 GMT, having risen as high as $100.37 before the vote. It settled down a hefty $2.11 at $98.53 on Wednesday when U.S. government data showed supplies rising and on a firmer dollar.

London Brent was up 92 cents at $96.25.

Inventories rose 4.28 million barrels to 294.5 million last week, the Energy Department said. Stockpiles were forecast to climb 2.75 million barrels, according to a Bloomberg News survey. Imports and refinery operations increased after storms curtailed supplies last month. Fuel use over the past four weeks averaged 19 million barrels a day, the lowest since October 2001.

Brent crude oil for November settlement rose $1.70 cents, or 1.8 percent, to $97.03 a barrel on London's ICE Futures Europe exchange. It was at $96.21 a barrel at 9:57 a.m. Singapore time. It declined yesterday $2.84, or 2.9 percent, to settle at $95.33 a barrel.

Oil prices are more volatile than at any time since the first Gulf War in 1991.
Historical price volatility during the last year for New York crude futures measured over 10, 30, 50 and 100 days. All are at their highest since January 1991 when U.S. and allied forces fought to expel Iraqi troops from Kuwait.

Oil futures plunged 9.8 percent on Sept. 29, the biggest drop in seven years, after Congress voted to reject the bank rescue plan. A week earlier, a record 16 percent jump led regulators to say they were on the lookout for price manipulation. Crude fell 28 percent in the third quarter, its worst performance in 17 years.

Author: Jo Amey