Oil falls to US$88.16, extending losses

New York's main contract, West Texas Intermediate for delivery in October, fell 89 cents to US$88.16 a barrel.

Brent North Sea crude for October delivery dropped 21 cents to US$114.34 approaching midday in London.

“The reaction to Obama's job creation plan has so far been mild but considering the size of the package and the likelihood of it being approved by Congress it should sooner or later inject some risk appetite into the markets,” said Filip Petersson, an analyst at SEB Commodity Research.

Overnight, Obama proposed a US$447 billion plan to revive the U.S. economy that includes cutting payroll taxes for employees and businesses, spending billions fixing roads and bridges and extending and revamping unemployment benefits.

Oil prices closed lower on Thursday ahead of Obama's jobs speech and despite data showing a drop in U.S. crude inventories of four million barrels last week.

The drawdown was not caused by strong demand from U.S. consumers, analysts said, attributing it instead to a temporary disruption of oil production in the Gulf of Mexico caused by Tropical Storm Lee.

“Yesterday we had an oil inventories report showing crude oil supply in the U.S. actually falling more than expected, and that has provided some support to prevent oil from falling further,” said Victor Shum, an analyst at Purvin and Gertz energy consultancy in Singapore.

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