Oil posts biggest 3-day gain since 1998 20 September 2008 2:45:09 (GMT+07:00) Provided by: Reuters News
* U.S. government crisis plans boosts markets * Oil companies work to restore U.S. production after Ike * Nigerian rebels attack pipeline By Richard Valdmanis and Matthew Robinson NEW YORK/LONDON, Sept 19 (Reuters) - Oil rose more than $6.50 on Friday to post its biggest three-day rally in a decade on expectations a sweeping U.S. government bailout plan would boost liquidity across the battered financial markets. U.S. crude oil prices <CLc1> jumped $6.67 to settle at $104.55 a barrel, bringing gains since Wednesday to 14.7 percent -- biggest three-day surge since December 1998 when the United States ramped up tensions on Iraq to allow arms inspections. London Brent rose $4.42 to $99.61. "This is tracking the recovery we've seen in the capital markets across the board on the government bailout plan. The liquidity has come back in and it is pushing us higher," said John Kilduff, senior vice president at MF Global. The U.S. government launched several multibillion-dollar programs to guarantee holdings in money-market mutual funds and curb short-selling while developing a broader plan to mop up toxic mortgage debt. [nN19477884] The moves came at the end of an agonizing week for Wall Street, in which investment bank Lehman Brothers <LEH.N> filed for bankruptcy, insurer AIG <AIG.N> was bailed out by the government and Merrill Lynch <MER.N> was forced to sell itself to Bank of America <BAC.N>. Investors had worried the confluence of crises severely threatened the stability of the U.S. economy -- a factor that helped push oil to a seven month low of $90.51 a barrel earlier in the week. Oil prices remain sharply down from their peaks over $147 a barrel hit in mid-July, pressured by mounting evidence that high energy costs and economic troubles are undercutting global fuel consumption. Oil prices also got a boost Friday from weakness in the U.S. dollar -- which strengthens overseas buying power in commodities -- and supply disruptions from the hurricane-hit United States and from OPEC-member Nigeria. "Traders will continue to alternate focus between the financial markets, which could result in further demand destruction, dollar movements as well as production out of the U.S. Gulf of Mexico," said Gerard Burg, a resource analyst at the National Australian Bank in Melbourne. Some 89.2 percent of oil production in the U.S. Gulf of Mexico -- the source of one-quarter of the United States' crude output -- remained idled on Thursday in the wake of Hurricane Ike, along with about 14 percent of the country's refined fuel capacity. "The market had hoped we'd see a fairly quick rebound in production from Ike, but that hasn't materialized," said Killduff. Meanwhile, militants in OPEC member Nigeria said they had attacked another oil pipeline in the Niger Delta. [nLI166946] The Movement for the Emancipation of the Niger Delta (MEND), which has declared an "oil war" against the oil sector and the military, said it used explosives to sabotage a Royal Dutch Shell-operated pipeline at the Cawthorne Channel in Rivers state. (Additional reporting by Fayen Wong in Perth; Editing by Marguerita Choy)
