Oil Prices Settle Below $99 as Supplies Rise

Oil prices fell Wednesday as U.S. government data showed supplies rising and global markets awaited a U.S. Senate vote on the financial sector rescue package.

U.S. light, sweet crude settled down $2.11, or 2.1 percent lower, at $98.53 a barrel.

London Brent crude settled down $2.95 at $95.22 a barrel.

U.S. crude oil inventories rose by 4.3 million barrels last week, data from the Energy Information Administration showed, as output from the Gulf of Mexico continued to recover from disruptions caused by Hurricane Ike.

Gasoline inventories showed a surprise 900,000-barrel rise as more refinery capacity came back online following the storm, which caused the worst disruption to the U.S. energy sector since the 2005 hurricane season.

AP

"The EIA data today showed the first signs of recovery after Hurricane Ike. The energy industry in the U.S. Gulf Coast is on the road to recovery, and this will add to the bearish sentiment in the market,'' said Phil Flynn, an analyst with Alaron Trading in Chicago.

Traders have kept a close watch on the slow recovery of U.S. oil infrastructure after Hurricane Ike hit the oil-rich U.S. Gulf of Mexico on Sept. 13.

Total U.S. oil product demand over the past four weeks fell 7.1 percent from a year earlier, as the growing economic crisis and high fuel costs continued to clip demand in the world's top consumer.

Oil prices have tumbled from record highs above $147 a barrel in July on signs of slowing oil demand from industrial economies.

Pressure has also come as investors sell oil and other commodities and move cash into safer investments amid turmoil in financial markets.

More From CNBC.com

Quick Stats for Third Quarter

Cramer: Market Orders Are For Suckers

Your First Move Wednesday

Farrell: Why Risk-Reward Favors Investors

Slideshow: Credit Crunch Cash Kings

The Senate was expected to vote late Wednesday on a new version of the $700-billion rescue package for Wall Street, rekindling hopes that the credit crisis can be eased before claiming yet more banks and causing further damage to the global economy.

"On a macro front, all eyes will remain on the $700-billion package going to vote in the Senate tonight and possibly back in the House (of Representatives) the second half of the week,'' said Chris Jarvis, senior analyst at Caprock Risk Management in New Hampshire.

"Failure to pass would put pressure across the board, while passing of the package would likely create a relief rally,'' he added.

The House of Representatives was expected to vote on the package on Friday.

The U.S. dollar rose against a basket of currencies Wednesday in anticipation of the bailout, adding additional pressure on oil prices.

Further signs of demand weakness came as industry data showed Japan's crude and main fuel inventories rising last week as refiners curbed production for a sixth straight week due to slowing consumption.

Copyright 2008 Reuters. Click for restrictions.