By Maryelle Demongeot
SINGAPORE (Reuters) - Oil was up $1 a barrel on Thursday after the U.S. Senate approved a $700 billion bailout of the U.S. financial industry, but erased earlier gains as concerns remained over weakening demand and growing supplies in the U.S.
The package for Wall Street, which has yet to be approved by the House of Representatives, rekindled hopes that the credit crisis can be eased, but traders and analysts said the supportive impact would be limited as eyes remained on falling demand.
U.S. light crude for November delivery rose $1.03 to $99.56 by 0229 GMT, having risen as high as $100.37 before the vote. It settled down a hefty $2.11 at $98.53 on Wednesday when U.S. government data showed supplies rising and on a firmer dollar.
London Brent was up 92 cents at $96.25.
"It should stabilize the equity markets so crude prices will get some support from it. But if demand falls off a cliff, bets are off. I think we will congest here for a while and then it is up to the economy and winter demand," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.
Oil prices have tumbled from record highs above $147 a barrel in July on signs of slowing oil demand from industrial economies.
Pressure has also come as investors sell oil and other commodities and move cash into safer investments amid turmoil in financial markets.
U.S. government data on Wednesday showed crude oil inventories up 4.3 million barrels last week as output from the Gulf of Mexico continued to recover from disruptions caused by Hurricane Ike.
Gasoline inventories also showed a surprise 900,000-barrel rise as more refinery capacity came back online following the storm, which caused the worst disruption to the U.S. energy sector since the 2005 hurricane season, the U.S. data from the Energy Information Administration showed.
Rising supplies compounded falling demand with total U.S. oil product demand over the past four weeks down 7.1 percent from a year earlier, as the growing economic crisis and high fuel costs have continued to clip demand in the world's top consumer.
The bailout vote failed to lift market significantly so far.
Asian stocks and the U.S. dollar reversed earlier gains while safe haven bids such as U.S. Treasuries rose even after the U.S. Senate approved a $700 billion bailout plan of the financial system.
(Reporting by Maryelle Demongeot; Editing by Michael Urquhart)
