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
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.