Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Oil rises on bailout worries

Crude ends the day higher as investors fret that the government's $700 billion economic rescue plan could cripple the dollar.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Kenneth Musante, CNNMoney.com staff writer

What's your view about granting taxpayers stock in any company taking part in the proposed $700 billion bailout?
  • It's needed to approve the plan
  • The plan should be approved with no conditions
  • No bailout in any form

NEW YORK (CNNMoney.com) -- Oil prices recovered Thursday as investors worried the government's $700 billion economic rescue plan could lead to a weaker dollar, the currency of oil trading.

Crude oil for November delivery settled up $2.29 to $108.02 a barrel on the New York Mercantile Exchange, recovering from a low of $103.22 a barrel as the session opened.

Lawmakers were closer to reaching a bipartisan agreement on a controversial $700 billion plan to prop up the nation's ailing financial businesses on Thursday.

President Bush addressed the nation late Wednesday, saying the country faces severe economic consequences if Congress doesn't approve the bill.

Investors were worried about the plan's effect on U.S. dollar inflation, and about its effect on U.S. debt, according to Rachel Ziemba, energy analyst with RGE Monitor.

According to a Wall Street Journal report, Congress wants to break the $700 billion into installments, which would give it more control over how much money leaves government coffers.

Demand: Concerns about inflation usually prompt investors to purchase commodities such as crude oil as a hedge. Analysts say prices might have been even higher Thursday were it not for worries about declining demand.

"Even if we do bail out (Wall Street), we're not going to see the rapid demand growth we've seen in the past," said Phil Flynn, senior market analyst with Alaron Trading in Chicago.

With the economy in a tailspin, investors worry demand for refined fuels could suffer further.

"Americans are consuming less gasoline, and even consuming less distillates and diesel fuel," said Ziemba.

Concern about falling demand has helped drive oil prices down from a record high of $147.27 a barrel on July 11.

Gasoline prices continued to fall as well, shedding 1.5 cents Thursday to a national average retail price of $3.70 a gallon, according to motorist group AAA.

Gulf shutdowns: Falling U.S. demand is keeping oil prices from skyrocketing, even in the face of lower production in the Gulf of Mexico due to this year's hurricane season, according to Ziemba.

A majority of the U.S. facilities in the Gulf of Mexico, which account for about a quarter of all U.S. production, remained shut in the wakes of hurricanes Ike and Gustav.

About 63% of crude production and 57% of natural gas production was still offline as of Wednesday, according to the Minerals Management Service.

Damage to U.S. refineries in the region also caused Mexican state-owned oil producer Pemex to cut output by 250,000 a day. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
8 cool things cars of the future will do The coolest features that tease the future of driving, from windshield projections to never needing to park again. More
The best gadget gifts for 2017 A holiday gift guide for anyone who wants to spread some techie joy. More
14 awesome toys for the holiday wish list From a DIY Star Wars Droid to a new Hatchimals toy and interactive Fingerlings, these products are worthy of a coveted spot on holiday wish lists. More