LONDON (Dow Jones)--Crude oil futures fell more than $2 in European trade Thursday following a burst of strengthening in the U.S. dollar, particularly against the euro. The euro's drop to a one-year low against the dollar prompted oil's spike lower Thursday, contributing to already-volatile oil price moves. Trading volumes remained thin with many participants waiting on the outcome of a proposed $700 billion bailout package for the financial sector, set for a House of Representatives vote Friday following approval from the U.S. Senate late Wednesday. While somewhat subordinate to developments on Capitol Hill, the oil market's fundamental concerns remained centered on a worsening demand outlook, lending downwards pressure on prices Thursday. Consumption fears were exacerbated after weekly U.S. government inventory data Wednesday revealed U.S. domestic oil use in the past four weeks fell 7.1% from a year ago, while gasoline demand fell 4.5% to its smallest amount in almost three years. At 1209 GMT, the front-month November Brent contract on London's ICE futures exchange was down $1.36 at $93.97 a barrel, up from an earlier intraday low of $92.53 a barrel. The front-month November light, sweet, crude contract on the New York Mercantile Exchange was trading $1.07 lower at $97.46 a barrel, recovering from its earlier drop to $96.02 a barrel. The ICE's gasoil contract for October delivery was down $7.25 at $910.50 a metric ton, while Nymex gasoline for November delivery was down 217 points at 233.83 cents a gallon. While many investors in crude oil, like those across most financial markets, opted to sit tight ahead of Friday's vote, the successful passage of the rescue plan isn't guaranteed to provide a lasting fillip for crude oil prices, analysts said. "An approved new bailout plan...could potentially boost equities and support commodity markets in the short term. Yet, it will take much longer to restore investor confidence and for global growth rates to pick up once again," said Andrey Kryuchenkov, analyst at Sucden Research in London. Given the global economic outlook, oil prices are likely to be steered by the market's concentration on demand issues. Analysts at Barclays Capital suggested that 2008 is set to rank alongside 1998 and 2002 as one of the weakest recent years for oil demand growth. "The market recently has tended to be heavily focussed on demand, and that focus seems to have been significantly magnified by the less-than-smooth progress of legislation through Washington this week," they said. "Given that focus, that scale of demand-side weakness is likely...to make it difficult for prices to stick above $105 per barrel for too long in current market circumstances." Reduced market participation amid uncertainty surrounding the U.S. financial rescue plan continues to allow for significant volatility in oil prices, meanwhile. Nymex crude oil prices spanned a more-than $11 range Monday, the sort of fluctuation that itself may be warding off investors. "The combination of increased risk aversion and increased price volatility, (the latter in part due to lower participation), may be currently feeding off each other," said DresdnerKleinwort analysts Gareth Lewis-Davies and Daniel Pfaendler in London. And as long as the outlook for all markets remains highly uncertain, oil prices face the prospect of further turbulence, they added.

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