Oil falls to $105 on doubts over U.S. rescue plan

By Fayen Wong

PERTH (Reuters) - Oil fell more than $3 to $105 a barrel on Friday, wiping out the previous session's gains, after talks between U.S. lawmakers over a bailout package to mop up toxic debt stalled.

Traders said oil's gains on Thursday were largely driven by news that lawmakers appeared close to a final deal on the massive bailout plan, which could help the world's largest energy-consuming nation avoid a deep recession that would cut deeply into fuel demand.

But the deal to rescue the faltering U.S. financial system hit a wall on Thursday amid bickering between Democrats and Republicans.

U.S. crude for November delivery fell $2.70, or 2.5 percent, to $105.32 a barrel by 9:23 a.m. BST, after hitting a low of $105.00. It had at $108.02 on Thursday.

London Brent crude fell $2.42 to $102.18.

Oil has gained about 11 percent so far this year on geopolitical tensions between Iran and the West, supply disruptions in Nigeria and a falling U.S. dollar, but it is still 28 percent below the record price of above $147 hit in mid-July.

"The general direction of the market is heading downwards because the economic sentiment and economic outlook are weak," said John Vautrain, an energy analyst at Purvin & Gertz in Singapore.

"It is a very volatile time and the market will get more and more jittery each day the U.S. rescue plan gets delayed."