Oil down on stronger US crude, gasoline supplies

Light, sweet crude for November delivery fell $2.11 to settle at $98.53 a barrel on the New York Mercantile Exchange. Prices traded erratically, however, rising as high as $102.84 overnight and falling to as low as $95.95.

Crude prices have seesawed between positive and negative territory in recent days as investors wait to see if lawmakers will approve a $700 billion U.S. financial bailout plan. On Tuesday, prices rose $4.27 to settle at $100.64 a barrel, recovering from a $10.52 drop the previous day--the second largest one-day dollar decline ever.

Wednesday's losses were tied to data showing rising U.S. fuel supplies but falling demand.

The Energy Department's Energy Information Administration said in its weekly report that crude stocks rose by 4.3 million barrels, or 1.5 percent, to 294.5 million barrels for the week ending Sept. 26. Analysts had expected stocks to rise or fall of 1.5 million barrels, according to a survey by energy research firm Platts.

At the same time, gasoline inventories rose by 900,000 barrels, or 0.5 percent, to 179.6 million barrels. Analysts expected stockpiles of the motor fuel to fall in the range of 1 million to 3 million barrels.

Fuel consumption for the four-week period ended Sept. 26 reached about 19 million barrels a day, down 7 percent from the same period a year ago, according to the EIA.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill., said the supply increases show that the Gulf Coast energy infrastructure is steadily resuming operations after shutdowns caused by Hurricanes Ike and Gustav--but also that U.S. consumers and businesses aren't in a position to resume their old fuel-guzzling habits.

"It reinforces the weak demand argument that's been weighing on the markets," Ritterbusch said. "At the same time, we're seeing very strong recovery in production of both crude oil and products in the aftermath of the hurricanes."

Senate leaders scheduled a vote for Wednesday on a version of the emergency rescue bill that adds substantial tax cuts meant to appeal to Republicans when it reaches the House of Representatives. The House rejected a similar plan Monday by a vote of 228-205.