Oil drifts down after House vote
Concerns about falling demand persist as investors mull bailout impact.
 |
| Track the latest commodity prices |
NEW YORK (CNNMoney.com) -- Crude prices didn't move much on Friday after the House of Representatives passed a bailout plan to shore up the nation's financial system, which could help restore demand for oil.
U.S. crude for November delivery settled down just 9 cents to $93.65 a barrel as floor trading closed in New York.
The oil market gave back modest gains after the House approved the plan. The contract was up about $1 before the vote.
The $700 billion rescue plan, designed to free banks from troubled assets and encourage them to lend, was rejected by the House in a Monday vote, but a modified version was approved by the Senate on Wednesday.
After the initial House rejection Monday, crude plummeted $10.52 a barrel, the most in dollar terms since 1991, when Operation Desert Storm was launched.
Demand and bailout: Investors hoped the sweetened bill would have a positive impact on demand, but analysts say the impact would likely be limited, and would take some time to materialize.
The bill is "only one step," said Rachel Ziemba, energy analyst with RGE Monitor, noting that the oil market also failed to react after the Senate approved its version of the bill.
"There are a lot of problems in the U.S. economy it doesn't solve," she said, and suggested the government would come up with more bailout plans to shore up other parts of the economy.
Falling demand for crude has been a major factor in oil's fall from a record high of $147.27 a barrel on July 11.
Oil prices fell more than 12% this week from $106.89 a barrel last Friday. The House's initial bailout rejection and a week of dismal economic news reinforced demand concerns.
Demand growth could take a while to materialize, since the cash released from bank coffers would need to filter down through the nation's lending apparatus in order to reach consumers and businesses, according to Neal Dingmann, senior energy analyst with Dahlman Rose & Co.
"It would take more than weeks, and even months," said Dingmann, "You're probably talking a month at the absolute soonest."
Dollar: The tighter credit markets have also led to a rise in the dollar over the past week. As banks became more and more averse to lending, the supply of dollars available to the currency market shrank, and the dollar gained against other currencies such as the 15-nation euro.
Since commodities such as oil are traded in U.S. dollars, a stronger dollar makes barrels of crude more expensive, which in turn drives down dollar-denominated oil prices.
The dollar actually slipped slightly against the euro Friday as the House debate continued.
Gasoline: As oil prices rose, the average price of gasoline in the U.S. continued to slide, falling overnight to $3.576 a gallon from $3.598 the day before, according to a daily poll from motorist group AAA.
The price of diesel fuel, which affects many businesses, especially those that rely heavily on transportation and shipping, fell to $4.065 from $4.076 a gallon.
Like crude oil, fuel prices have also trended downward since July as demand for energy dried up. 
