NEW YORK - Oil prices swung back above $100 a barrel Tuesday following a precipitous plunge a day earlier, with a growing consensus among investors that Congress will resurrect a failed U.S. financial bailout plan.
Light, sweet crude for November delivery rose $4.27 to settle at $100.64 a barrel on the New York Mercantile Exchange, after earlier rising as high as $101.40.
On Monday, prices fell $10.52 to settle at $96.37 — the second largest drop ever in dollar terms — after House legislators rejected the $700 billion bailout, stunning investors and raising fears of a long economic crisis that could dramatically curb global energy demand. The Dow Jones industrial average plunged 777 points, its largest one-day point decline ever.
Crude has fallen about $20, or 17 percent, in the last eight days.
Some recovery was to be expected following Monday's fall, and analysts said prices will likely remain in a holding pattern until the fate of the financial rescue plan is determined. Lawmakers were expected to reconvene in Washington on Thursday, though it's unclear if they will attempt another vote on the bailout.
Whether or not there is any agreement on a U.S. bailout, oil market watchers say global financial tremors have already forced consumers and businesses to scale back energy consumption, a trend that could take prices lower in coming weeks.
"Even if the bailout gets done, it's not going to solve everything immediately. The slowdown will have to work itself out for demand to take off again," Matt Zeman, head commodities trader at LaSalle Futures in Chicago.
The drop in energy demand has been especially pronounced overseas. In India, domestic oil product sales totaled 2.41 million barrels per day in August, the lowest level this year, according to Barclays Capital research. In the same month, Japan's oil demand fell by 8.4 percent.
If oil prices and energy demand keep falling, some analysts say OPEC countries may act to defend the $100 per-barrel level. The cartel earlier this month said it would reduce output by 520,000 barrels a day.
"There is a chance that OPEC would cut production in coming months on the back of ongoing and potentially greater demand weakness," said Costanza Jacazio, an oil analyst with Barclays Capital in New York.
Weaker demand for fuel continues to weigh on prices at the pump.
A gallon of regular shed a penny overnight to a new U.S. average of $3.633, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices hit a record average of $4.114 a gallon on July 17.
Prices are expected to fall further as U.S. Gulf energy output ramps back up after the passage of Hurricanes Ike and Gustav. About 48 percent of Gulf oil production and 47 percent of natural gas output remained shut-in Tuesday following precautionary closures prompted by the storms, according to the U.S. Mineral Management Service.
But gas shortages caused by refinery shutdowns continue to plague some southeastern states including Georgia, Tennessee and North Carolina, causing long lines at filling stations and pushing pump prices near $4 a gallon. Officials say the region could see fluctuating fuel supplies for several more days.
Crude's rise came despite a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.
On Tuesday, the euro bought $1.4069 compared with $1.4472 late Monday in New York.
In other Nymex trading, heating oil futures rose 10.62 cents to settle at $2.8947 a gallon, while gasoline prices rose 8.77 cents to settle at $2.49 a gallon. Natural gas futures rose 21.7 cents to settle at $7.438 per 1,000 cubic feet.
In London, November Brent crude rose $4.19 to settle at $98.17 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.