LONDON (Reuters) – Oil fell toward $97 a barrel on Thursday, after the U.S. Senate’s approval of a $700 billion bailout of the financial industry failed to allay concerns over weakening fuel demand in the world’s top energy consumer.
U.S. light crude for November delivery fell 98 cents to $97.55 by 5:27 a.m. EDT, off an earlier low of $96.02 and erasing earlier gains above $100.
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 $1.33 3t $94.00.
The Senate’s approval of the rescue plan reassured European stock markets, but oil’s focus is shifting toward falling demand in industrialized countries.
“Expect crude to track firmer equity markets for a little while longer,” said Edward Meir, of broker MF Global. “But we expect the two to eventually decouple.
“On its own, we think crude will not fare as well, and will be particularly vulnerable heading into Q4,” he said. “We would not be surprised to see $75-$80 on WTI (U.S. crude) by the end of the year.”
Oil prices have tumbled from record highs above $147 a barrel in July on signs of slowing oil demand from industrial economies.
U.S. 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 U.S. energy sector since the 2005 hurricane season.
Total U.S. oil product demand over the past four weeks was down 7.1 percent from a year earlier, providing evidence of the impact of the financial crisis and high fuel costs on U.S. consumption.
Oil prices have also come under pressure from investors shifting money out of commodities into safe haven investments such as cash and government bonds because of the financial sector crisis.