Crude sinks on rescue's rejection

Oil drops $10.52; dollar stronger

NEW YORK - Crude oil fell the most in almost seven years, leading commodities including copper and corn lower, after the House rejected a $700 billion financial rescue plan.

Oil slumped more than $10, helping send the Reuters/Jefferies CRB index of 19 commodities to the biggest drop since at least 1956, after the House voted 228 to 205 against the measure. Commodities also dropped as the pound and the euro weakened against the dollar after European banks were bailed out.

"At this point, economic prospects can only be characterized as dim," said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. "With the financial crisis engulfing Europe, one has to wonder whether Asian demand can be maintained, which was the last hope for energy bulls."

Crude oil for November delivery fell $10.52 to settle at $96.37 a barrel on the New York Mercantile Exchange. The drop was the biggest in percentage terms since Nov. 15, 2001, and the largest dollar decline since Jan. 17, 1991, when US-led forces expelled Iraq from Kuwait.

Prices are down 35 percent from the record $147.27 a barrel reached on July 11 and are heading for the first quarterly drop since the end of 2006.

Gasoline for October delivery declined 26.81 cents, or 10 percent, to settle at $2.397 a gallon in New York, the biggest drop since the ethanol-based contract began trading in October 2005. Heating oil dropped 23.45 cents to $2.7604 a gallon.

US fuel demand averaged 19.5 million barrels a day in the four weeks ended Sept. 19, the lowest since October 2003, according to Energy Department data.

The euro and pound dropped against the dollar after Belgium, the Netherlands, and Luxembourg extended a $16.3 billion lifeline to Fortis, the largest Belgian financial services firm and the UK Treasury seized Bradford & Bingley PLC, the nation's biggest lender to landlords.

The dollar strengthened 1 percent to $1.4469 per euro and the pound lost 1.8 percent to $1.8115. A stronger dollar makes commodities more expensive for buyers outside the United States, potentially weakening demand.

"The spread of credit problems to Europe is raising concerns that demand will begin to drop off as it already has in the US," said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Conn. "The dollar is on a tear against the euro and pound because of the rescue of a number of European banks over the weekend."