SINGAPORE - Oil prices fell to near $104 a barrel Thursday in Asia as investors weighed supply delays in the Gulf of Mexico against concerns that the U.S. credit crisis may slow global economic growth and hurt crude demand.
Light, sweet crude for November delivery was down $1.55 to $104.18 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore. The contract fell overnight 88 cents to settle at $105.73.
Traders are concerned about the turmoil in the U.S. financial system will impact economic growth and crude demand from the world's biggest economy.
President George W. Bush strongly urged Congress to act quickly to pass a $700 billion financial industry bailout, warning Americans in Wednesday speech that failing to act fast risked dire economic consequences such as disappearing retirement savings, rising foreclosures, lost jobs and closed businesses.
"Markets hate uncertainty, and this thing is hanging over everybody's head," said Gavin Wendt, head of mining and resources research at consultancy Fat Prophets in Sydney. "I don't think anyone is too keen to take a position in oil either way right now."
With the administration's original proposal considered dead in Congress, top House leaders issued an upbeat statement late Wednesday saying there was progress toward revised legislation that could pass. Bush summoned presidential candidates Barack Obama, John McCain and legislative leaders to an extraordinary White House summit in hopes of hashing out a deal.
Oil investors are also eyeing the impact the bailout plan may have on the value of the dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation. The 15-nation euro was steady Thursday at $1.4706. The dollar was little changed at 105.81 yen.
"Assuming the package is implemented, I think the inevitable upshot is that it will make commodities more attractive because you'll see a lot more dollars printed, which will devalue the U.S. currency," Wendt said.
Mexico's state oil company said Tuesday it temporarily reduced oil production because U.S. refineries damaged by Ike have canceled shipment orders.
Petroleos Mexicanos, or Pemex, lowered its daily output by 250,000 barrels a day. The company said it expects production to be back to normal by the end of the week. Pemex produced an average of 2.75 million barrels a day in August, the latest available output figure.
About 66 percent of oil production and 61 percent of natural gas output in the Gulf of Mexico remains shut-in after the passage of Hurricane Gustav and Ike, according to the U.S. Minerals Management Service. The Gulf area is home to a quarter of U.S. oil production and 40 percent of refining capacity.
"There's not a lot of spare supply around," Wendt said. "We're only one supply hiccup away from prices being $20 a barrel higher."
OPEC's decision earlier this month to cut production by 520,000 barrels a day and militant threats to Nigerian oil operations have added to the supply shortage.
In other Nymex trading, heating oil futures fell 1.03 cents to $3.003 a gallon, while gasoline prices rose 1.05 cents to $2.605 a gallon. Natural gas for October delivery dropped 2.7 cents to $7.652 per 1,000 cubic feet.
In London, November Brent crude rose 65 cents to $103.10 a barrel on the ICE Futures exchange.