Oil higher in Asia

September 24, 2008
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, SINGAPORE, September 24 – Oil prices rose in Asian trade Wednesday but the market was dominated by worries that a US government rescue plan may not be enough to save the economy from slower growth and falling energy demand, dealers said.

New York\’s main contract, light sweet crude for November delivery, rose 96 cents to 107.57 dollars a barrel after a drop of 2.76 dollars to 106.61 dollars at the close of floor trading Tuesday at the New York Mercantile Exchange.

On Monday the price soared 16.37 dollars, the benchmark contract\’s biggest ever one-day gain, to close at 120.92 dollars.

Brent North Sea crude for November delivery rose 75 cents to 103.83 dollars a barrel. The contract dropped 2.96 dollars Tuesday to settle at 103.08 dollars in London after a jump of 6.43 dollars on Monday.

David Johnson, an oil analyst with Macquarie Securities, said prices will be volatile but the dominant factor is fear for the economic future.

"Despite all the rescue packages that we\’ve seen, people are still not convinced that they are going to drag us out of the mire," Johnson said from Hong Kong.

Traders fear that depressed economic activity will extend into next year and lead to weaker demand for oil, and lower prices, he said.

Oil prices have already fallen heavily from record levels above 147 dollars in early July, on worries the global economy is slowing and causing a dent in energy demand.

Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before Congress on Tuesday after proposing a bailout of up to 700 billion dollars worth of tainted mortgage-related assets at the root of a global financial crisis.

They argued that lawmakers must pass the emergency measure quickly or put the entire US economy at risk.

But congressmen have expressed reservations over what would be the largest government financial intervention since the 1930s Great Depression. The two finance chiefs were to face more grilling Wednesday at a hearing of the House of Representatives Financial Services Committee.

Michael Davies at the Sucden brokerage in London said concerns about the US toxic debt bailout plan are growing and initial optimism over it was unfounded.

"The US plans are still far from certain and will not help the damage to the real economy already done by the recent turmoil, which we are yet to see," he said.

US media reported Tuesday that the Federal Bureau of Investigation is probing allegations of fraud by 26 Wall Street firms including several investment giants whose collapse sent world markets into turmoil.

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