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Oil down for third day on financial turmoil

Oil fell for a third consecutive day as the market awaited a bailout vote in the US House of Representatives but showed skepticism that the package would be enough to limit further oil demand falls.

business Updated: Oct 03, 2008 08:53 IST

Oil fell for a third consecutive day on Friday as the market awaited a bailout vote in the US House of Representatives but showed skepticism that the package would be enough to limit further oil demand falls.

The House of Representatives could vote as early as Friday on the revised $700 billion financial industry rescue bill that was approved by the US Senate late on Wednesday, but has failed to lift markets so far.

US light crude for November delivery fell 51 cents to $93.46 a barrel by 0123 GMT, having slid by a hefty $4.56 on Thursday on demand worries and a stronger dollar.

London Brent crude fell 43 cents to $90.13 a barrel.

"Traders are watching the outcome of the US House of Representatives vote on the bail-out package," Jonathan Kornafel, director Asia, Hudson Capital Energy, said in a note on Friday.

"Unfortunately, while a "no" vote may result in a financial meltdown, a "yes" vote may cause nothing more than increased volatility across all markets," he added.

US stocks dropped 4 percent on Thursday and Asian stocks were also lower on Friday.

The growing financial crisis has added to concerns about oil demand, which has slumped in industrialized countries like the United States this year, sending crude prices crashing from record highs over $147 a barrel hit in July.

Total US oil product demand over the past four weeks is down 7.1 percent from a year earlier, the U.S Energy Information Administration's weekly data showed.

Additional pressure on crude prices came as investors -- who had flocked to crude and other commodities earlier this year as a hedge against the weak dollar and inflation -- unwound positions.

"In the current situation when the market is facing tightness in the money market, investors don't want to take risks in oil and other commodities markets," said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd in Tokyo.

The dollar hovered near a one-year peak against a basket of major currencies on Friday as banks and financial institutions have scrambled to buy the U.S. currency on the open market after being locked out of frozen money markets.

US government data -- showing rising inventories of crude, gasoline and natural gas as oil infrastructure recovered from Hurricane Ike -- also weighed on crude prices.