NEW YORK (Reuters) - Oil dropped four percent yesterday as financial market turmoil stoked demand concerns and sent investors to seek safer havens.

US crude traded down $3.85 to $94.68 in morning trading after touching a low of $94.02 earlier. London Brent fell $4.08 to $91.25 a barrel.

Shockwaves from the global credit crisis spread, threatening industry and jobs worldwide and pressuring the US Congress to finish up a $700 billion bailout of the US financial sector.

The growing financial crisis have added to concerns about oil demand, which has slumped in industrialised nations like the US this year, sending crude prices crashing from record highs over $147 a barrel hit in July. "People are worried about demand deterioration (and) the economy falling into recession," said Tom Knight, trader for Truman Arnold.

US stocks plunged yesterday as reports on unemployment claims and factory orders added to worries about the economy of the world's top energy consumer.

Additional pressure on crude prices came as investors — who had flocked to crude and other commodities earlier this year as a hedge against the weak dollar and inflation — unwound positions.

"We are continuing to see funds unwinding positions. This has not only affected speculators but also the commercial side of the trade in view of problems related to credit constricting," said Gene McGillian, analyst for Tradition Energy.

Dollar gains against the euro and other currencies also helped push down crude. US government data showing rising inventories of crude, gasoline and natural gas as oil infrastructure recovered from Hurricane Ike, also weighed on prices.

The fate of the US rescue plan, passed by the Senate 74-25 on Wednesday night, now lies with the House of Representatives, which is expected to vote on the bill tomorrow.

The House rocked global markets on Monday by rejecting an earlier version of the bailout.

"The passage of the bailout package might be a short-term boost to the market as it injects a little bit of confidence that some problems may be solved as the government absorbs the problem debts from banks," said McGillian.

"This will reverse the current strength of the dollar and for some that means a move up for oil, but I don't see this holding for long because we have to deal with demand here, which is deteriorating."