Oil Rises Above $98

Oil rose more than $2 a barrel toward $98 on Tuesday, rebounding after a near 10 percent drop in the previous session, as fears of a major meltdown in financial markets eased.

European stocks firmed on Tuesday, suggesting some belief that markets fell too far in Monday's selloff in response to the rejection by U.S. lawmakers of a $700 billion financial sector rescue plan.

U.S. crude was up $2.31 at $98.68 a barrel by 8:10 a.m. EDT, after losing $10.52 on Monday to $96.37 -- the second biggest fall since April 23, 2003. London Brent crude rose $2.60 to $96.58.

Concern over the financial sector continued, nonetheless, with Belgian-French financial services group Dexia getting a 6.4 billion euro ($9.18 billion) capital boost from public shareholders.

Ireland offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets, helping sentiment in the equity market.

On Monday, the U.S. House of Representatives voted 228 to 205 against a bailout plan that would have allowed the Treasury to buy up toxic assets from banks. The shock rejection of the plan sent stock markets sliding.

Oil has fallen sharply from a record high of $147.27 reached in July on signs that high energy prices and the financial crisis have cut into crude demand in the United States and other industrialized 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.

TradingEconomics.com, Bloomberg.com
9/30/2008 6:25:53 AM