Oil Is Steady After Falling on Doubts Rescue Plan to Aid Demand

By Christian Schmollinger

Oct. 15 (Bloomberg) -- Crude oil was little changed near $79 a barrel in New York after falling on skepticism that a U.S. government plan to invest $250 billion in banks will be enough to bolster economic growth and spur fuel demand.

Oil has tracked movements in equity markets this month as the credit crisis deepened. The International Energy Agency and the U.S. Energy Department cut their global oil demand forecasts for next year as the worst financial turmoil since the 1930s may lead to a global recession.

``There is a lot of uncertainty about what the bailouts mean for the end-user and the economy,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.

Crude oil for November delivery was at $78.69 a barrel, up 6 cents, on the New York Mercantile Exchange at 2:52 p.m. Singapore time. Oil fell as much as 1 percent to $77.85 today.

Prices, down 8.6 percent from a year ago, have dropped 47 percent from the record $147.27 a barrel on July 11. Oil fell $2.56, or 3.2 percent, yesterday to $78.63 a barrel.

Oil in New York climbed more than $3 a barrel on Oct. 13 when the Standard & Poor's 500 Index had its biggest one-day gain since 1939 and the Dow Jones Industrial Average posted its best rally since 1933.

Fuel Consumption

U.S. fuel demand averaged about 18.7 million barrels a day during the four weeks ended Oct. 3, the lowest since June 1999, according to an Energy Department report on Oct. 8. The U.S. consumes 24 percent of the world's oil.

``Everything is emanating out of the U.S. and the heightened risk of a slowdown there is going to keep oil on the back foot,'' said ANZ's Pervan.

A government report tomorrow may show that U.S. crude-oil and gasoline supplies inventories rose last week, according to the median of responses by analysts in a Bloomberg News survey. The report will be released a day late because of the Columbus Day federal holiday Oct. 13 in the U.S.

Brent crude oil for November settlement was at $74.60 a barrel, up 7 cents, on London's ICE Futures Europe exchange at 2:53 p.m. Singapore time.

The November contract expires tomorrow. The more-active December futures were at $76.54 a barrel, up 22 cents, at 2:56 p.m. Singapore time.

Production Restored

Energy producers have restored about 61 percent of oil production in the U.S. Gulf of Mexico and 63 percent of natural- gas output after platforms were shut down because of hurricanes Gustav and Ike.

Companies reported that 81 of 694 production platforms were still evacuated and personnel have returned to all 116 rigs in the region, the U.S. Minerals Management Service said in a statement on its Web site. About 506,000 barrels of daily oil output and 2.7 billion cubic feet of gas production remain idled.

The Gulf of Mexico accounts for 26 percent of U.S. oil production and 14 percent of gas output. The Gulf normally produces about 1.3 million barrels of oil and 7.4 billion cubic feet of gas a day, according to the Minerals Management Service, which is part of the U.S. Interior Department.

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