Crude Oil Falls in New York Before Vote on U.S. Bank Rescue

By Angela Macdonald-Smith

Sept. 29 (Bloomberg) -- Crude oil fell in New York in advance of a vote on a $700 billion U.S. bank-rescue plan amid concern the measures won't prevent an economic slowdown that would cut demand in the world's biggest energy-consuming nation.

U.S. lawmakers are reviewing a tentative agreement to revive credit markets through the bailout package, which may be voted on by the House tomorrow, House Speaker Nancy Pelosi said. Oil prices dropped as much as 3.5 percent on Sept. 26 after House Republicans rejected the proposed rescue, stalling an agreement.

``Even if the Troubled Asset Rescue Plan is passed, that doesn't necessarily mean there aren't any obstacles on the road to economic recovery,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. ``There are worries about the outlook for the international economy''

Crude oil for November delivery fell as much as 99 cents, or 0.9 percent, to $105.90 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $106.28 a barrel at 7:17 a.m. in Singapore.


Prices have fallen about 28 percent from the record $147.27 a barrel reached on July 11. The contract gained 4 percent last week.

President George W. Bush said in a speech Sept. 27 that the package was needed to prevent a ``deep and painful recession.'' Talks continued through the weekend aimed at reaching agreement before global financial markets reopened this week. The plan would give Treasury Secretary Henry Paulson an immediate $250 billion to buy bad loans from financial companies, with the rest to be doled out in stages.

`Fallen Markedly'

U.S. fuel demand averaged 19.5 million barrels a day during the past four weeks, the lowest since October 2003, the Energy Department said in a Sept. 24 report. Sales of new homes in the U.S. fell in August to a 17-year low and orders for durable goods dropped more than forecast, government reports showed Sept. 25.

``We have a situation where the evidence to date is that in recent months U.S. oil consumption has fallen quite markedly,'' Commonwealth Bank's Moore said.

Oil also fell as companies continued restarting petroleum production plants, refineries and pipelines after hurricanes Gustav and Ike. Royal Dutch Shell Plc, the largest oil producer in the Gulf of Mexico, said Sept. 26 it will have the majority of its offshore output back in one to two weeks.

Crude-oil prices may fall this week on the concern U.S. fuel consumption will weaken because of lower economic growth, a Bloomberg News survey found. Fourteen of 29 analysts surveyed, or 48 percent, said prices will decline through Oct. 3.

In contrast, hedge-fund managers and other large speculators increased their net-long positions in New York crude futures in the week ended Sept. 23, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumber short positions by 41,728 contracts on the New York Mercantile Exchange, the Washington- based commission said in a report Sept. 26.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net