TOKYO - US crude futures fell for a third session on Tuesday, hovering around US$96 a barrel amid concern over oil demand after the House of Representatives rejected the US$700 billion rescue package for the financial sector.

Stocks plunged after lawmakers voted against the bailout and major US and European banks needed emergency deals to stave off collapse, sending investors fleeing to the safety of gold and debt.

US November crude fell 29 cents to US$96.08 a barrel in electronic trading by 0005 GMT on Tuesday. It settled down US$10.52 to US$96.37 a barrel, after touching a session low of US$95.04, in the second biggest drop since April 23, 2003. November crude dropped 11.8 per cent last Tuesday following a spike in the expiring October crude contract in the previous session.

London Brent crude traded down US$9.56 to settle at US$93.98 a barrel.

The House voted 228-205 to reject the bailout bill, which would have authorized the Treasury Department to purchase broken mortgage-backed bonds from banks with the goal of jump-starting stalled capital markets.

'The bailout package being defeated sent stock markets tumbling, weighing on petroleum as well,' said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

The mounting economic crisis has stirred concerns about oil demand, helping drag prices from a record high above US$147 a barrel in July.

In addition, investors who had rushed into commodities earlier this year as a hedge against inflation and the weak dollar have sold crude for safer havens.

'This decision is a shock to the system,' said Sarah Emerson, director of Energy Security Analysis Inc. 'The oil market is reacting strongly in part because of the implications of a weak economy on demand.'

Traders also were watching the slow recovery of US oil infrastructure following after Hurricane Ike hit the US Gulf of Mexico.

The UN Security Council unanimously passed a resolution on Saturday that again ordered Opec nation Iran to halt its nuclear enrichment work, but it imposed none of the new sanctions Washington and its allies wanted. -- REUTERS