Oil falls below US$96 on financial turmoil

PERTH – Oil extended losses below US$96 a barrel on Tuesday, after slumping almost 10 per cent in the previous session, as fear gripped financial markets in the wake of US lawmakers’ shock rejection of a US$700 billion rescue plan.

Asian stocks opened sharply lower after Wall Street’s biggest fall since the crash of 1987, and were down roughly 4 per cent amid mounting fears about the health of the global economy, with China’s two biggest banks opening more than eight per cent lower. US light crude for November delivery fell 82 cents to US$95.55 a barrel, up from a low of US$95.50 touched earlier, and after losing US$10.52 on Monday to $96.37 – the second biggest fall since April 23 2003.”It was a surprise that Congress rejected the bailout and it’s just reinforcing the belief that the US economy is really heading towards a downward spiral.That means the demand side of the equation for oil will deteriorate rapidly,” said Toby Hassall, chief analyst at Commodity Warrants Australia in Sydney.”It’s just getting worse and worse and no one knows when this is going to end.”Oil has fallen about 35 per cent since its US$147 peak in mid-July, amid signs that high energy prices and the US financial crisis have cut into crude demand in the United States and other industrialised nations.In addition, oil has also been dragged down as investors, who had rushed into commodities earlier this year as a hedge against inflation and the weak dollar, sold crude for safer havens.The House voted 228-205 to reject the bailout bill, which would have authorised the Us Treasury Department to purchase broken mortgage-backed bonds from banks with the goal of jump-starting stalled capital markets.Analysts said the spread of credit problems to Europe was also stoking fears that the financial turmoil, which started with risky lending to the overheated US property market, had gone rapidly global.”Slower international economic growth is bound to dent oil demand,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.Separately, oil and gas production in the Gulf of Mexico continued to increase on Monday as companies brought their facilities back on line after Hurricane Ike, the Minerals Management Service said.Nampa-ReutersUS light crude for November delivery fell 82 cents to US$95.55 a barrel, up from a low of US$95.50 touched earlier, and after losing US$10.52 on Monday to $96.37 – the second biggest fall since April 23 2003.”It was a surprise that Congress rejected the bailout and it’s just reinforcing the belief that the US economy is really heading towards a downward spiral.That means the demand side of the equation for oil will deteriorate rapidly,” said Toby Hassall, chief analyst at Commodity Warrants Australia in Sydney.”It’s just getting worse and worse and no one knows when this is going to end.”Oil has fallen about 35 per cent since its US$147 peak in mid-July, amid signs that high energy prices and the US financial crisis have cut into crude demand in the United States and other industrialised nations.In addition, oil has also been dragged down as investors, who had rushed into commodities earlier this year as a hedge against inflation and the weak dollar, sold crude for safer havens.The House voted 228-205 to reject the bailout bill, which would have authorised the Us Treasury Department to purchase broken mortgage-backed bonds from banks with the goal of jump-starting stalled capital markets.Analysts said the spread of credit problems to Europe was also stoking fears that the financial turmoil, which started with risky lending to the overheated US property market, had gone rapidly global.”Slower international economic growth is bound to dent oil demand,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.Separately, oil and gas production in the Gulf of Mexico continued to increase on Monday as companies brought their facilities back on line after Hurricane Ike, the Minerals Management Service said.Nampa-Reuters