Oil prices well above $100 a barrel
Updated on 23 September 2008
Oil prices are well above 100 US dollars a barrel on Tuesday after worries about American's bank bail-out caused the biggest one-day gain on record on Monday.
The October contract for New York light sweet crude, which expired on Monday, surged as much as 25 US dollars to 130 US dollars a barrel before falling back to settle at 120.92 US dollars, a gain of 16.37 US dollars.
The contract for oil to be delivered in November was not up as sharply, rising by 6.62 US dollars to 109.37. A steadier session on Asian markets on Tuesday helped the price fall to below 108 US dollars a barrel.
Prices had surged on Monday as investors fled to oil amid unease about whether the 700 billion US dollar plan to buy bad mortgage debt will stabilise the financial system. It will rescue financial firms from hundreds of billions of debt that plummeted in value when housing prices began to fall in 2006.
The Treasury Department's first draft said that only mortgage-related assets would be purchased. But in a later version, the Treasury secretary asked for the power to expand purchases to troubled assets beyond real estate.
That could leave taxpayers picking up the tab on things like bad car loans and credit card debt.
Last week oil traded as low as 91 US dollars a barrel, having fallen from the peak of 147 US dollars a barrel it reached in July.
UK motorists will be hoping the upward trend in oil prices does not continue after a rare period of falling prices in recent days.
Last week saw a brief price war develop between the major retailers as they moved to cut prices in the wake of two months of oil price declines.
Total slashed 3p off the cost of a litre of unleaded and diesel fuels across its network of 500 garages in England and Wales, following similar moves by BP, Morrisons and Asda. Shell and Esso have promised to follow suit.
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