* Senate approves $700 billion rescue plan
* Oil down, erases earlier gains
* Market focuses on slow demand, growing supplies
(Recasts, updates prices, adds quote)
By Maryelle Demongeot
SINGAPORE, Oct 2 (Reuters) - Oil fell towards $98 a barrel
on Thursday after the U.S. Senate's approval of a $700 billion
bailout of the U.S. financial industry failed to lift concerns
over weakening demand and growing supplies in the U.S.
The package for Wall Street, which has yet to be approved
by the House of Representatives, rekindled hopes that the
credit crisis can be eased, but traders and analysts said the
supportive impact would be limited as eyes remained on falling
demand.
U.S. light crude for November delivery <CLc1> fell 21 cents
to $98.32 by 0637 GMT, having risen as high as $100.37 before
the vote. It settled down $2.11 at $98.53 on Wednesday when
U.S. government data showed supplies rising and on a firmer
dollar.
London Brent <LCOc1> was down 24 cents at $95.09.
"Once the bill is finally approved, I would expect crude
oil to sell off. In the short term, I would look for us to head
for the low $90s," said Jonathan Kornafel, Asia Director,
Hudson Capital Energy Singapore.
"We may move higher today or tomorrow, but in the fourth
quarter of 2008 and first quarter of 2009, I would expect crude
to trend lower," he added.
Oil prices have tumbled from record highs above $147 a
barrel in July on signs of slowing oil demand from industrial
economies.
Pressure has also come as investors sell oil and other
commodities and move cash into safer investments amid turmoil
in financial markets.
U.S. government data on Wednesday showed crude oil
inventories up 4.3 million barrels last week as output from the
Gulf of Mexico continued to recover from disruptions caused by
Hurricane Ike.
Gasoline inventories also showed a surprise 900,000-barrel
rise as more refinery capacity came back online following the
storm, which caused the worst disruption to the U.S. energy
sector since the 2005 hurricane season, the U.S. data from the
Energy Information Administration showed. []
Rising supplies compounded falling demand with total U.S.
oil product demand over the past four weeks down 7.1 percent
from a year earlier, as the growing economic crisis and high
fuel costs have continued to clip demand in the world's top
consumer.
The bailout vote failed to lift markets significantly so
far.
"It should stabilise the equity markets so crude prices
will get some support from it. But if demand falls off a cliff,
bets are off. I think we will congest here for a while and then
it is up to the economy and winter demand," said Tony Nunan,
risk management executive at Tokyo-based Mitsubishi Corp.
Asian stocks fell and investors sought the relative safety
of government debt on Thursday after the U.S. Senate's approval
of a massive bank bailout plan failed to dispel the deepening
worries about the global economy. []
(Additional reporting by Annika Breidthardt; Editing by
Michael Urquhart)
