Oil prices fell on Friday amid uncertainty over the fate of a proposed US government bank bailout mired in wrangling between the White House and Congress.
New York’s main contract, light sweet crude for November delivery, fell US$1.13 a barrel to close at US$106.89.
In London, Brent North Sea crude for November shed US$1.06 to settle at US$103.54.
US President George W. Bush’s administration and lawmakers struggled on Friday to hammer out a compromise over a US$700 billion plan to buy tainted mortgage-related assets from financial firms.
A deal that appeared on the verge of happening had lifted oil prices by more than US$2 on Thursday, but uncertainty returned after the market closed when the would-be deal disintegrated in the face of a revolt from Bush’s own party in Congress.
“The rhetoric from the president, the Treasury secretary and the Fed chairman is far from calming,” said Sherry Cooper of BMO Capital Markets. “Warnings of financial Armageddon could, in itself, trigger panic.”
Phil Flynn at Alaron Trading said the macroeconomics of the situation “is playing right into the bear oil trader’s hands.”
“It is obvious that the demand growth for oil is going to be severely challenged. With the world’s largest consumer of almost everything ... about to have a financial meltdown, the prospects for demand growth are not that good,” Flynn said.
Oil prices have dropped sharply from record-high levels above US$147 in July on worries that demand will shrink in the faltering global economy.