Oil near $94 as market awaits US bailout vote

[October 03, 2008]  SAN FRANCISCO (AP) -- Oil prices were erratic near $94 a barrel Friday as investors waited to see if a reworked $700 billion bailout package would pass the U.S. Congress and help stabilize the economy of the world's biggest crude consumer.

A short slide by the U.S. dollar against other major currencies was seen as helping boost oil prices, but expectations that U.S. jobless data to be released later Friday would show growing stress in the labor market kept a ceiling on gains.

By midday in Europe, light, sweet crude for November delivery was up 12 cents to $94.09 a barrel in electronic trading on the New York Mercantile Exchange.

Earlier in the session, the contract fell as low as $92.81 before rising to $94.85 and then slipping again.

Overnight, prices fell $4.56 to settle at $93.97, the lowest level since Sept. 16.

In London, November Brent crude rose 17 cents to $90.13 a barrel on the ICE Futures exchange.

The U.S. House of Representatives was expected to vote later Friday on the bank rescue package after the U.S. Senate overwhelmingly approved it Wednesday. House lawmakers stunned investors Monday by rejecting the bailout plan, although the Senate added $100 billion in tax breaks and other sweeteners in a bid to win over enough dissenting House votes.

"Approving the bailout may create a little bounce and alleviate the negative sentiment temporarily," said John Vautrain, an energy analyst with consultancy Purvin & Gertz in Singapore. "The problem is U.S. gasoline demand has been off one heck of a lot."

Statistics from the U.S. Labor Department released Thursday showed more signs of a weakening economy, adding to concerns about falling oil demand.

The Labor Department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000, significantly above analysts' estimate of 475,000 and a seven-year high.

Also Thursday, the U.S. Commerce Department said factory orders in August plunged by 4 percent compared to July, a much steeper decline than the 2.5 percent drop analysts expected and the biggest setback since a 4.8 percent plunge in October 2006.

"All the indicators have been very negative," Vautrain said. "There's been an economic wallop, and people don't have as much money to spend."

Significant gains over the past days by the dollar against the euro also have helped push down prices, but the greenback lost some ground early Friday.

Investors tend to buy commodities like oil to defend against dollar weakness and a hedge against inflation, but return to the U.S. currency as it strengthens.

The 15-nation euro rose to $1.3873 in Friday trading, while the dollar fell slightly to 105.10 yen.

In other Nymex trading, heating oil futures rose 0.65 cent to $2.716 a gallon, while gasoline prices added 0.7 cent to $2.262 a gallon. Natural gas for November delivery fell 1.1 cents to $7.47 per 1,000 cubic feet.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.