Oil Is Steady After First Drop in a Week on Rescue Plan Concern

By Christian Schmollinger

Sept. 24 (Bloomberg) -- Crude oil was little changed after declining for the first time in a week on skepticism that a U.S. government bailout plan for financial companies will bolster economic growth and demand for fuels.

Oil dropped as much as 4.9 percent yesterday as lawmakers debated how the rescue measure should be structured, threatening early enactment. U.S. crude stockpiles are expected to decline in a report out later today, extending a 14.2 million-barrel withdrawal in the past four weeks.

``We're in a situation where the oil markets are very uncertain about the economic and financial market outlook,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``Unless measures are taken to stabilize the stresses in the U.S. financial system, there is more downside risk to the economy and therefore energy demand.''

Crude oil for November delivery was at $106.77 a barrel, up 16 cents, in after-hours electronic trading on the New York Mercantile Exchange at 9:10 a.m. Singapore. Prices are down 27 percent from the record $147.27 a barrel on July 11.

Yesterday, oil fell $2.76, or 2.5 percent, to $106.61 a barrel after touching $104.05 a barrel. It was the fourth day this month prices have declined more than $5 a barrel.

Oil for October delivery rose a record $16.37 a barrel on Sept. 22 before expiring as traders who sold the future last week, when oil dipped close to $90, had to buy the contracts back. The U.S. Commodity Futures Trading Commission is investigating the price move and has subpoenaed dozens of traders, two people briefed about the legal proceedings said.

Lawmakers Balk

Treasury Secretary Henry Paulson is pushing Congress for quick approval of the $700 billion plan to remove illiquid assets from the banking system. Lawmakers have balked at rubber-stamping the proposal, with Democrats demanding it include support for homeowners and limits on executive pay and Republicans questioning the plan's reach and size.

Brent crude oil for November settlement was at $103.48 a barrel, up 40 cents, on London's ICE Futures Europe exchange at 8:58 a.m. Singapore time. It declined $2.96, or 2.8 percent, to settle at $103.08 a barrel yesterday.

U.S. crude-oil and fuel inventories probably declined last week because production platforms, refineries and ports along the Gulf of Mexico were shut in the aftermath of hurricanes Gustav and Ike, a Bloomberg News survey of analysts showed.

Supplies of crude oil probably fell 2.5 million barrels from 291.7 million barrels, according to the median of responses by 12 analysts before an Energy Department report scheduled for release at 10:35 a.m. in Washington.

U.S. energy producers have resumed output for about 33 percent of oil and 38 percent of natural-gas production in the Gulf of Mexico after storms in the region.

Energy companies reported that 4 rigs and 203 production platforms remain evacuated from hurricanes earlier this month, the Minerals Management Service said yesterday in a statement on its Web site. About 870,000 barrels of daily oil production remains shut-in, along with 4.56 billion cubic feet of gas.

The Gulf of Mexico accounts for 26 percent of U.S. oil production and 14 percent of natural-gas output.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.