* Oil gains on hopes U.S. bailout bill will be passed
* U.S. Senate sets vote on financial bailout
* Crude stockpiles forecast to rise in EIA weekly report
By Fayen Wong
PERTH, Oct 1 (Reuters) - Oil extended its rally and rose
over $1 on Wednesday to hover around $102 a barrel, buoyed by
hopes that Washington would find a way to pass a rescue plan to
head off a deep recession in the United States and abroad.
The U.S. Senate agreed to vote on the bailout package on
Wednesday night that will include an increase in the amount of
bank deposits insured, a Senate aide said on Tuesday.
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U.S. light crude for November delivery <CLc1> rose 81 cents
to $101.45 a barrel by 0118 GMT, after rising as much as $1.60
at the start of electronic trading. The contract settled $4.27
higher at $100.64 on Tuesday in a relief rally.
London Brent crude <LCOc1> rose 84 cents to $99.01.
"There is a strong belief that the U.S. Congress will pass
the rescue plan in a few days, so that's supporting prices,"
said Ryuichi Sato, an analyst at Mizuho Corporate Bank in
Tokyo.
"But the fundamentals for the U.S. financial markets
haven't changed so there is still a lot of downside risk in
that regard."
Oil's rebound comes after its steep tumble on Monday, when
it dropped $10.52 in the second-biggest fall since April 23,
2003, as fear gripped financial markets after U.S. lawmakers
rejected the $700 billion bailout plan.
But U.S. stocks, the dollar and oil prices have since
strengthened on renewed optimism that U.S. lawmakers would soon
reach a deal on a financial rescue plan.
U.S. securities regulators gave the financial industry a
reprieve on Tuesday from marking hard-to-value assets down to
fire sale prices, a move which threw a lifeline to an industry
beset by strained credit markets and a series of bank failures.
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Still, analysts said that expectations of a rise in U.S.
crude inventories, along with signs that the financial crisis
has spread to Europe and erode energy demand further, would
keep a check on prices.
"Prices over the coming months look vulnerable to a further
weakness, as sentiment continues to plummet on a weakening
demand backdrop," said Mark Pervan, a resource analyst at
Australia & New Zealand (ANZ) bank based in Melbourne.
A Reuters poll of analysts ahead of weekly U.S. government
inventory data due out on Wednesday predicted crude stockpiles
in the world's top consumer rose 2.4 million barrels in the
week to Sept. 26. Analysts forecast distillates fell by 1.2
million barrels while gasoline inventories were seen down 1.6
million barrels. []
Oil has dropped from a record high $147.27 reached in July
on signs that high energy prices and the financial crisis have
cut into crude demand in top energy consumer the United States
and as investors -- who had rushed into commodities earlier
this year as a hedge against inflation and the weak dollar --
sold crude for safer havens.
A weaker economic growth outlook in Asia, where China's
voracious energy demand has helped underpinned oil's gains in
recent years, would also cast a pall over medium-term crude
demand.
Asia's economic growth slowdown this year will be more
severe than previously thought as the global financial crisis
crimps exports, a Reuters polls show. []
The fallout from the global financial crisis is seen to
drag China's economic growth down to 9.9 percent this year,
market the first time since 2002 that the world's
fastest-growing major economy has seen growth slip to single
digits.
(Reporting by Fayen Wong)
