Oil falls on US inventory build, eyes bailout plan

U.S. crude traded down 27 cents to $100.37 a barrel by 12:53 p.m. EDT. London Brent crude fell $1.11 to $97.06.

Crude oil inventories in the United States, the world's largest oil consumer, increased by 4.3 million barrels last week, data from the Energy Information Administration (EIA) showed. Analysts had expected a 2.4-million-barrel increase.

The government data also showed a surprise 900,000-barrel increase in gasoline stocks, against analysts' forecasts for a 1.6-million-barrel drop.

Total oil product demand over the past four weeks fell 7.1 percent from a year earlier.

"The EIA data today showed the first signs of recovery after Hurricane Ike. The energy industry in the U.S. Gulf Coast is on the road to recovery and this will add to the bearish sentiment in the market," said Phil Flynn, an analyst with Alaron Trading in Chicago.

Oil prices have tumbled from record highs over $147 a barrel hit in July as high prices and the wider economic crisis cut demand in the United States and other industrialized economies.

Pressure has also come as investors sell oil and other commodities and move cash into safer haven investments amid turmoil in financial markets.

The Senate will vote late on Wednesday on a new version of the $700-billion rescue package for Wall Street, rekindling hopes that the credit crisis can be eased before claiming yet more banks and causing further damage to the global economy.

"On a macro front, all eyes will remain on the $700-billion package going to vote in the Senate tonight and possibly back in the House (of Representatives) the second half of the week," said Chris Jarvis, senior analyst at Caprock Risk Management in New Hampshire.

"Failure to pass would put pressure across the board, while passing of the package would likely create a relief rally," he added.

Further signs of demand weakness came as industry data showed Japan's crude and main fuel inventories rising last week as refiners curbed production for a sixth straight week due to slowing consumption.

(Reporting by Rebekah Kebede in New York, Ikuko Kao in London and Fayen Wong in Perth; Editing by Christian Wiessner)