"Oil's torn. It doesn't know if it's a financial indicator or a commodity," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "It rallied with gold and silver early on and then later, with the stock market."
Crude seesawed through the day, reflecting a financial system in crisis.
Investors first sought commodities including oil as a hedge against the economic fallout from the financial crisis; they sent the October contract soaring $4 and past $100. The market was reacting in part to moves by the Federal Reserve and other foreign central banks to pump as much as $180 billion into global money markets in an effort to boost liquidity.
The emergency measure follows a week of chaos on Wall Street that saw the demise of Lehman Brothers Holdings Inc., the forced takeover of Merrill Lynch and Co., and the unprecedented government bailout of American International Group Inc.
But traders then recoiled when they realized that a financial meltdown and weak global economy would further erode already flagging demand for energy.
Then, late in the day, the stock market surged on a CNBC report that the federal government was considering the creation of an entity that would hold the bad debt that has crippled U.S.
financial institutions. The report sent the Dow Jones industrials soaring more than 400 points, which in turn raised oil traders' hopes that the financial crisis won't do more serious damage to the economy and demand for oil.
Crude prices have steadily fallen since reaching a record $147.27 a barrel on July 11. Last Friday, oil fell below $100 for the first time since April.
Oil had jumped Wednesday as investors fled equities to crude, gold and other commodities as a short-term safe haven amid global market unrest.
Stepped-up attacks by Nigerian militants against the country's oil infrastructure helped support oil prices. In a fifth day of violence, Nigeria's main militant group said Wednesday that it had destroyed an oil-pumping station and a pipeline crossing southern Nigeria in a rare daylight attack.
A spokesman for Nigeria's state oil company said Wednesday that militant attacks are now cutting the country's daily oil production by about 1 million barrels a day, 40 percent of what the country produced before the militant campaign began three years ago.
"In the last few days, militant attacks in Nigeria have been stirring up again, but that's on the back burner right now," said Victor Shum, an energy analyst with consultancy Gertz & Purvin in Singapore. "I see downward pressure on oil in the near-term, with the key support level at $90."
Meanwhile, the U.S. government reported Wednesday a bigger-than-expected drop in crude supplies, reflecting the shutdown of virtually all Gulf Coast oil production because of Hurricane Ike and Hurricane Gustav.
The Energy Information Administration said U.S. crude stocks fell by 6.3 million barrels for the week ending Sept. 12, much bigger than the 3.7 million barrel drop expected by analysts surveyed by the energy research firm Platts.
Also on Thursday, the House approved measures to curb speculation in oil and other commodity markets by hedge funds and large institutional traders. However, the White House said President Bush likely would veto the bill if it gets to his desk.
In other Nymex trading, heating oil futures fell nearly 4.23 cents to settle at $2.7824 a gallon, while gasoline prices added nearly 2 cents to finish at $2.4824 a gallon. Natural gas for October delivery slipped nearly 3 cents to close at $7.621 per 1,000 cubic feet.
In London, November Brent crude added 35 cents to end at $95.19 a barrel on the ICE Futures exchange.
