CRUDE OIL climbed more than 15 per cent - or $25 a barrel - the biggest one-day gain, as the dollar weakened more dramatically against the euro than at any time since January 2001, boosting the appeal of commodities as a hedge.
The October contract, which expires today, rose almost $12 more than the contract for November delivery, as traders rushed to close positions.
Oil, gold, corn and other commodities climbed as the dollar dropped on concern that a US proposal to buy $700 billion of troubled assets from financial firms will deepen the budget deficit.
"This looks like a squeeze play," said Phil Flynn, senior trader at Alaron Trading in Chicago. "All of the contracts are up, but nothing like October. This is the last day of trading and someone is scrambling to guarantee supply."
David Kirsch, an energy markets analyst at PFC Energy in Washington agreed. "Somebody did place a wrong bet and is trying to cover that position. That's why you've got that yawning gap and a normal gap between the November and December contracts."
Crude oil for October delivery rose $18.05, or 17 per cent, to $122.60 a barrel at the 2:30pm close of floor trading on the New York Mercantile Exchange.
The contract for delivery in November, which was much more actively traded, was up only $6.62 at $109.37. London Brent crude traded up $5.84 at $105.45.
Futures climbed as much as $25.45 to $130 a barrel, the highest since July 22nd. Oil has risen 35 per cent since September 16th as lawmakers pledged fast consideration of the US Treasury's plan to acquire devalued mortgage-related securities.
Oil had tumbled from record highs above $147 a barrel in mid-July, weighed down by growing evidence that high energy costs and economic woes were undercutting global fuel demand.
"The key driver continues to be the US rescue package, which has changed the sentiment in the oil market," said Bank of Ireland analyst Paul Harris.
The slow recovery of the US oil sector after Hurricane Ike also supported prices, after causing the biggest disruption to the nation's energy supplies since 2005.
Nearly 80 per cent of oil production in the US Gulf of Mexico, home to a quarter of US oil output, remained shut along with seven refineries.
Oil prices were also supported by news China increased crude imports 11.54 per cent in August from a year earlier.
However, gains were capped by news that Nigeria's main militant group had begun a unilateral ceasefire on Sunday, after a week of clashes with the military and attacks on oil installations that cut output in Africa's top producer. - ( Reuters/Bloomberg)
