SINGAPORE – Oil prices fell to near $103 a barrel in Asia Monday on concern that economic growth will slow across the globe despite a tentative agreement in Washington on a $700 billion bailout package to stabilize the U.S. financial system.
Light, sweet crude for November delivery was down $3.73 to $103.16 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell Friday $1.13 to settle at $106.89.
Congressional leaders and the White House agreed Sunday to a rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House of Representatives for a vote Monday.
"The bailout package reduces the chance of a complete meltdown," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But worries on the demand side will continue to weigh on oil prices."
The plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.
Congress insisted on a stronger hand in controlling the money than the White House had wanted. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.
"It's still a crisis situation," Shum said. "The market is concerned about the depth and breadth of this global downturn."
Prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.
The 15-nation euro fell Monday to $1.4344 from $1.4614 on Friday while the dollar rose to 106.30 yen from 106.01.
"The bailout should inject confidence in the markets in the short-term," Shum said. "Longer term, it increases money supply, inflation and likely weakens the dollar — all of which supports oil prices."
In other Nymex trading, heating oil futures fell 2.59 cents to $2.969 a gallon, while gasoline prices dropped 2.14 cents to $2.6437 a gallon. Natural gas for October delivery fell 8.1 cents to $7.547 per 1,000 cubic feet.
In London, November Brent crude fell $1.52 to $102.02 a barrel on the ICE Futures exchange.