Oil fell by more than $2.00 to below $97 a barrel on Thursday after the US Senate's approval of a $700 billion bailout of the financial industry failed to allay concerns over weakening demand and growing supplies in the country.
The package for Wall Street, which has yet to be approved by the House of Representatives, rekindled hopes that the credit crisis could be eased, but traders and analysts said the supportive effect would be limited as eyes remained on falling demand.
US light crude for November delivery fell $1.54 cents to $96.99 by 0737 GMT, off an earlier low of $96.50 and erasing earlier gains above $100 before the vote.
It settled down $2.11 at $98.53 on Wednesday, when U.S.
government data showed supplies rising and on a firmer dollar.
London Brent was down $1.48 at $93.85, off an earlier low of $93.24. 'Once the bill is finally approved, I would expect crude oil to sell off. In the short term, I would look for us to head for the low $90s,' said Jonathan Kornafel, Asia Director, Hudson Capital Energy Singapore.
'We may move higher today or tomorrow, but in the fourth quarter of 2008 and first quarter of 2009, I would expect crude to trend lower,' he added.
Oil prices have tumbled from record highs above $147 a barrel in July on signs of slowing oil demand from industrial economies.
Pressure has also come as investors sell oil and other commodities and move cash into safer investments amid turmoil in financial markets.
US government data on Wednesday showed crude oil inventories up 4.3 million barrels last week as output from the Gulf of Mexico continued to recover from disruptions caused by Hurricane Ike.
Gasoline inventories also showed a surprise 900,000-barrel rise as more refinery capacity came back online following the storm, which caused the worst disruption to the US energy sector since the 2005 hurricane season, the US data from the Energy Information Administration showed.
Rising supplies compounded falling demand with total US oil product demand over the past four weeks down 7.1 percent from a year earlier, as the growing economic crisis and high fuel costs have continued to clip demand in the world's top consumer. - Reuters