PERTH (Reuters) - Oil fell by more than $2.00 a barrel on Tuesday, extending
losses after slumping almost 10 percent in the previous session, as fear
gripped financial markets in the wake of U.S. lawmakers' shock rejection of a
$700 billion rescue plan.
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Asian stocks chalked up the biggest monthly decade in more than a decade and
Japan's Nikkei share average ended down 4.1 percent at a three-year low.
Major European markets open down as much as 2 percent, according to bookmakers.
U.S. light crude for November delivery fell $2.50 to $93.87 a barrel by 703
GMT, after losing $10.52 on Monday to $96.37 -- the second biggest fall since
April 23, 2003.
London Brent crude was down $2.50 at $91.48.
"It was a surprise that Congress rejected the bailout and it's just reinforcing
the belief that the U.S. economy is really heading towards a downward spiral.
That means the demand side of the equation for oil will deteriorate rapidly,"
said Toby Hassall, chief analyst at Commodity Warrants Australia in Sydney.
"It's just getting worse and worse and no one knows when this is going to end."
Oil has fallen about 35 percent since its $147 peak in mid-July, amid signs
that high energy prices and the U.S. financial crisis have cut into crude
demand in the United States and other industrialised nations.
In addition, oil has also been dragged down as investors, who had rushed into
commodities earlier this year as a hedge against inflation and the weak dollar,
sold crude for safer havens.
The House voted 228-205 to reject the bailout bill, which would have authorized
the Treasury Department to purchase broken mortgage-backed bonds from banks
with the goal of jump-starting stalled capital markets.
Analysts said the spread of credit problems to Europe was also stoking fears
that the financial turmoil, which started with risky lending to the overheated
U.S. property market, had gone rapidly global.
"Slower international economic growth is bound to dent oil demand," said David
Moore, a commodities analyst at the Commonwealth Bank of Australia.
Separately, oil and gas production in the Gulf of Mexico continued to increase
on Monday as companies brought their facilities back on line after Hurricane
Ike, the Minerals Management Service said.
Some 48 percent of U.S. oil production in the Gulf of Mexico and 47.4 percent
of the region's natural gas output remained shut, down from 57.4 percent and
52.8 percent respectively on Friday.
