Oil Steady After Falling on Doubts Bailout Plan to Boost Demand

By Mark Shenk

Oct. 15 (Bloomberg) -- Crude oil traded little changed near $79 a barrel after falling yesterday amid skepticism that a U.S. government plan to invest $250 billion in banks will be enough to bolster economic growth and fuel use.

Oil has tracked movements in equity markets this month as the credit crisis deepened. A government report tomorrow may show that U.S. crude-oil and gasoline supplies rose for a third week. The International Energy Agency and U.S. Energy Department cut their forecasts of global oil demand next year.

``The oil market is getting its cue from the stock market right now,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``There are signs that we might be getting our market back and begin trading on supply and demand again before long.''

Crude oil for November delivery rose 6 cents to $78.69 a barrel at 9:42 a.m. Sydney time on the New York Mercantile Exchange. Prices, which are 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 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.

``The perception has developed that the rescue plan is much more supportive for equity markets than for commodities,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``With such an anemic economic growth and poor demand, any rally in commodities will be short lived.''

Fuel Demand

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.

``Any rally will be sold until we get a sign that demand is recovering,'' Barakat said.

The department's report tomorrow is forecast to show that U.S. crude oil and gasoline 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 declined $2.93, or 3.8 percent, to settle at $74.53 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.