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Oil lower after US bailout plan rejection

World oil prices fell slightly in Asia on Tuesday following a nearly 10 percent drop in New York after US legislators rejected a plan to bail out the ailing financial sector.

business Updated: Sep 30, 2008 09:03 IST

World oil prices fell slightly in Asia on Tuesday following a nearly 10 percent drop in New York after US legislators rejected a plan to bail out the ailing financial sector.

The bailout deal proposed the purchase of up to 700 billion dollars worth of tainted mortgage-related assets at the root of a global financial crisis.

Dealers said collapse of the plan raises the chance of further economic turmoil, and weaker energy demand as a result.

New York's main contract, light sweet crude for November delivery, fell 18 cents to 96.19 dollars a barrel. The contract had tumbled 10.52 dollars, or 9.8 percent, to 96.37 dollars a barrel at the close of trade on the New York Mercantile Exchange on Monday.

Brent North Sea crude for November delivery fell 68 cents to 93.30 after dropping 9.56 dollars to settle at 93.98 on Monday in London.

"The US is looking at a severe recession if Congress fails to pass some sort of package," said Augustine Faucher at Economy.com.

James Williams, an analyst at WTRG Economics, said downward pressure on oil prices should continue.

"Oil traded for the last five years on fear of supply interruptions. It is now trading on fear of economic collapse," Williams said.

John Kilduff at MF Global agreed. "Expectations for demand are... in doubt with the expected future economic contraction," he said.

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