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Oil falls after US bailout deal

business Updated: Sep 29, 2008 09:15 IST

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World oil prices fell in Asian trade on Monday after a proposed US government bailout of the financial sector moved closer to Congressional approval, dealers said.

New York's main contract, light sweet crude for November delivery, fell 1.04 dollars to 105.85 dollars from 106.89 at the close of floor trading on the New York Mercantile Exchange Friday.

Brent North Sea crude for November delivery dropped 69 cents to 102.85 dollars a barrel.

On Sunday US lawmakers struck a deal on draft legislation for the bailout of up to 700 billion dollars for struggling Wall Street banks hit by the worst financial crisis since the Great Depression of the 1930s.

Republican negotiator Judd Gregg said he hoped the bill could be voted on as early as Monday by both the House of Representatives and the Senate.

Victor Shum, an analyst with energy consultancy Purvin and Gertz, said the deal would offer only short-term relief for investors worried about the impact of the financial crisis on energy demand in the world's biggest oil user.

"It looks like it has got agreement from both the Democrats and the Republicans," Shum said in Singapore.

"However, there are still a lot of worries about the depth and length of the economic impact of this crisis... These worries will weigh on prices," he said.

Oil prices have dropped sharply from record high levels above 147 dollars in July on worries that demand is shrinking in a US-led global slowdown.

The main points of the 106-page bill, known as the Emergency Economic Stabilization Act of 2008, include the immediate release of 250 billion dollars to enable the government to buy up "troubled assets" at the root of a global financial crisis.

In the bill, the president is authorised to approve a further 100 billion dollars, but the plan gives Congress a veto power over purchases above that limit and sets a ceiling for all purchases of 700 billion dollars.