Oil slips after job report, $700B bailout

Oil prices slipped in volatile trading on Friday after Congress approved a historic $700 billion bailout of the nation's teetering financial industry as the longterm health of the global economy remained questionable.

Investors bet down the price for crude early in the day when the US Department of Labor reported that employers slashed payrolls in September by the greatest amount in more than five years, but got back into the market when Wells Fargo Co stepped in to buy Wachovia Corp. for $15.1 billion.

Labor Department figures showed that payrolls shrank by 159,000, more than the 100,000 economists predicted. The nation's unemployment rate remained flat at 6.1 per cent, as expected.

And few believed that the unprecedented bailout package, passed early in the afternoon, would rekindle the global appetite for energy any time soon.

"I don't think it will be capable of putting a floor under oil prices," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

Light, sweet crude for November delivery fell 9 cents to settle at $93.88 a barrel on the New York Mercantile Exchange.

On Thursday, prices closed at their lowest level in two weeks, tumbling below $94 a barrel on doubts that a revamped bailout plan will be enough to avoid a protracted economic slump. Settling at $93.97 a barrel, the price was the lowest since Sept. 16.

Ritterbusch noted demand deterioration is not only intact, "it's been accentuated by this financial rescue effort and the subprime loan issues."

November Brent crude fell 31 cents to settle at $90.25 a barrel on the ICE Futures exchange.

The US Senate overwhelmingly approved a sweetened bailout plan on Wednesday after House lawmakers stunned investors earlier in the week by rejecting it.

The Senate added $100 billion in tax breaks and more in bid to win over enough dissenting House votes.

"Approving the bailout may create a little bounce and alleviate the negative sentiment temporarily," said John Vautrain, an energy analyst with consultancy Purvin & Gertz in Singapore. "The problem is US gasoline demand has been off one heck of a lot."

Statistics from the US Labor Department released on Thursday showed more signs of a weakening economy, adding to concerns about falling demand.

In a sign of how far consumers are pulling back, retail gasoline prices fell for the 11th week in the last three months. There was a brief pause in price declines because of hurricanes Gustav and Ike, which disrupted supplies in the Gulf of Mexico.

The Energy Information Administration reported that as of Monday, prices fell 8.6 cents to a national average $3.632 a gallon.

That's still 31 per cent more than last year, and high gasoline prices continue to squeeze consumers.

On Thursday, the US Commerce Department said factory orders in August plunged by 4 per cent compared to July, a much steeper decline than the 2.5 per cent drop analysts expected and the biggest setback since a 4.8 percent plunge in October 2006.

"All the indicators have been very negative," Vautrain said. "There's been an economic wallop, and people don't have as much money to spend."

Significant gains over the past days by the dollar against the euro also have helped push down prices, but the greenback lost some ground early Friday.

Investors tend to buy commodities like oil to defend against dollar weakness and a hedge against inflation, but return to the US currency as it strengthens.

The 15-nation euro rose to $1.3856 in Friday trading.

In other Nymex trading, heating oil futures rose 4.75 cents to $2.6620 a gallon, while gasoline prices fell 2.67 cents to $2.2283 a gallon. Natural gas for November delivery fell 12.3 cents to $7.358 per 1,000 cubic feet.