Oil prices fell more than $2 a barrel Thursday on worries that demand for crude will erode further and the dollar strengthened against the euro. But trading was volatile.
By the midafternoon in Europe, light, sweet crude for November delivery was down $2.10 to $96.43 a barrel in electronic trading on the New York Mercantile Exchange after briefly falling below $96.
Earlier in the session, prices had risen above $100 on expectations the U.S. Congress will pass a revised $700 billion financial industry bailout this week. It is hoped the proposal could ease tight credit conditions and allow banks to lend more money.
The November crude contract fell $2.11 to settle at $98.53 on Wednesday.
Statistics from the U.S. Labor Department released Thursday showed more signs of a weakening economy, adding to concerns about falling oil demand.
The Labor Department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000, significantly above analysts' estimate of 475,000. The total is the highest since just after the Sept. 11 terrorist attacks seven years ago.
Significant gains over the past days by the dollar against the euro have helped push down prices. Investors tend to buy commodities like oil to defend against dollar weakness and a hedge against inflation, but return to the U.S. currency as it strengthens.
The 15-nation euro bought $1.3773 in afternoon European trading, down from $1.4061 in the previous session.
The U.S. Senate late Wednesday approved the rescue bill, 74-25, after adding tax breaks and a provision to raise the cap on federal deposit insurance. The House of Representatives, which rejected an earlier version of the bill Monday, will likely vote on the new version by the end of the week.
"It's probably going to be bullish in the short term if the plan is approved," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "It shows we're actually doing something, which would be a reprieve for the market."