Oil rose more than $4 on Tuesday to above $100 a barrel as expectations US lawmakers would pass a financial stability plan boosted global markets. The US House of Representatives rejected the $700 billion bailout plan on Monday, sending oil and other markets tumbling, but US President George W. Bush and congressional leaders pledged to continue negotiations.
US crude rose $3.88 to $100.25 a barrel by 2:09 pm EDT (1809 GMT), off an earlier peak of $101.40 and after losing $10.52 on Monday in the second-biggest fall since April 23, 2003. London Brent crude LCOc1> traded up $3.63 to $97.61. "I do think that Congress will pass the bailout package, possibly before this weekend," said Mark Waggoner, president of Excel Futures.
The US dollar surged and global stocks clawed back from Wall Street's worst day in 20 years as investors bet Washington would will eventually pass the plan to stimulate credit markets and stave off a possible recession. Oil has dropped from a record high $147.27 reached in July on signs that high energy prices and the financial crisis have cut into crude demand in the United States and other industrialised nations.
Additional pressure has come as investors - who had rushed into commodities earlier this year as a hedge against inflation and the weak dollar - sold crude for safer havens. Signs the financial crisis was spreading to Europe could erode demand further, analysts warned. "Slower international economic growth is bound to dent oil demand," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
Belgian-French financial services group Dexia is getting a 6.4 billion euro ($9.18 billion) capital boost from public shareholders. Ireland offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets, helping sentiment in the equity market.
Analysts said the spread of credit problems to Europe was stoking fears the financial turmoil, which started with risky lending to the US property market, had gone global rapidly. Opec seaborne oil exports, excluding Angola and Ecuador, rose 50,000 barrels per day (bpd) in the four weeks to September 14 but fell sharply from Gulf producers, Lloyd's Marine Intelligence Unit said.
A Reuters poll of analysts ahead of weekly US government inventory due out on Wednesday predicted crude stockpiles in the world's top consumer rose 1.2 million barrels in the week to September 26. Analysts forecast distillates fell by 1.4 million barrels while gasoline inventories were seen down 1.6 million barrels.
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