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LONDON (AFP) — Oil prices rallied Tuesday on bargain-hunting after slumping 10 percent a day earlier when US lawmakers rejected a multi-billion-dollar rescue package for ailing American banks, traders said.
New York's main contract, light sweet crude for November delivery, climbed 2.41 dollars to 98.78 dollars a barrel. London's Brent North Sea crude for November rose 2.23 dollars to 96.23 dollars. Prices had nosedived on Monday, driven by worries that further economic turmoil in the United States, the world's largest economy, could significantly dampen global oil demand, traders said. "Crude futures bounced back up (on Tuesday), following a heavy sell off, with uncertainty still haunting financial markets but with European (stock) indices holding firm," said Sucden analyst Andrey Kryuchenkov. "Credit markets are still paralysed, despite massive monetary injections by major central banks over the weekend and on Monday in order to boost liquidity into the system." He said "investors worry that a prolonged credit crisis would further undermine already waning demand for energy amid slowing global growth" Oil prices rebounded in line with US and European stock markets as investors hoped the US Congress would vote again and pass the 700 billion dollar bank bailout plan. Oil prices on Monday plunged 10 percent after the US House of Representatives narrowly rejected the plan, throwing markets into a tailspin. The House of Representatives voted 228-205 to reject the emergency legislation. Oil "prices were knocked lower when a tentative plan to thaw out the nation's credit markets fell apart," said Mike Fitzpatrick, analyst at MF Global. US President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke argue that the massive package is urgently needed to avert a wider collapse of the economy. "The rhetoric from the president, the Treasury secretary and the Fed chairman is far from calming," said Sherry Cooper of BMO Capital Markets. "Warnings of financial Armageddon could, in itself, trigger panic," she added. Phil Flynn at Alaron Trading said the macroeconomics of the situation "is playing right into the bear (seller) oil trader's hands. "It is obvious that the demand growth for oil is going to be severely challenged. With the world's largest consumer of almost everything ... about to have a financial meltdown, the prospects for demand growth are not that good," Flynn said. "Participants are waiting and watching to see what .. appears from Washington," he added. Oil prices have dropped sharply from record-high levels above 147 dollars in July on worries that demand will shrink in the faltering global economy. http://afp.google.com/article/ALeqM5gKjYN3yJ-doBqqxZ7RRVUFvSMuyg |