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(AP) - Oil prices spiked more than $25 a barrel Monday
-- the biggest one-day price jump ever -- as anxiety over the
government's $700 billion bailout plan, a weak dollar and an
expiring crude contract ignited a dramatic rally.

      Light, sweet crude for October delivery jumped as much as $25.45
to $130 a barrel on the New York Mercantile Exchange, before falling
back to settle at $120.92, up $16.37. 

The contract expired at the
end of the day, adding to the volatility as traders rushed to cover
positions; the October price began accelerating sharply in the last
hour of regular trading, a common occurrence when a contract is
about to go off the board.


      Still, the rally, which shattered crude's previous one-day price
jump of $10.75, set June 6, showed the intensity of emotion in the
market. The Nymex temporarily halted electronic crude oil trading
after prices breached the $10 daily trading limit. Trading resumed
seconds later after the daily limit was increased.

      The November crude contract, which became the front-month
contract at the end of Monday's session, was trading at $108.69, up
$5.94, still a sharp gain.

      In other trading, gold prices shot up more than $44.30 to settle
at $909 an ounce, and other safe-haven commodities also rallied,
underscoring investors' uncertainly about the direction of the
economy and their fear of more turmoil ahead.

      "We're off to the races again," said Jim Ritterbusch,
president of energy consultancy Ritterbusch and Associates in
Galena, Ill. "There's a renewed scramble for commodities because
of a general weakness in the dollar."

      Crude has gained about $30 in a dramatic four-day rally that has
at least temporarily halted oil's steep two-month slide below $100.

At this rate, crude is within striking distance of its all-time
record of $147.27, reached in July.

      Oil's sharp gains came as energy traders grappled with the
implications of the government's proposed $700 billion initiative
to stem the U.S. financial crisis by absorbing billions of dollars
of banks' bad mortgage-related securities. 


Anxiety over the plan
also sent stocks sharply lower Monday; the credit markets were
calmer than they were last week, but still showing the effects of
investors' nervousness.


      "They're going to have to continue auctioning off a whole lot
of Treasurys to finance these projects, so the dollar is going to
suffer," said Matt Zeman, head trader at LaSalle Futures in
Chicago. "Right now it's fear and anxiety driving people who want
tangible assets."

      The 15-nation euro rose to $1.4807 in afternoon trading, up from
the $1.4470 on Friday. A weak greenback was a catalyst for the
commodities boom of the past year, and analysts said large
investment funds were expected to pour money back into the sector.

      "That trade was very successful in past so if the dollar keeps
weakening, a lot people are going to want to own hard assets like
crude," said Andrew Lebow, senior vice president and broker at MF
Global in New York.

      But there is still much uncertainty about what impact the U.S.
rescue plan will have on energy demand. Oil's run-up near $150 a
barrel in July and a weak U.S. economy has forced Americans to cut
back on their driving and led business to scale down operations.

Though pump prices have eased from record levels above $4 a gallon,
they remain expensive, and more softening in the economy would
likely further curtail energy use in the world's thirstiest
consumer.

      "There are a lot of issues to be filled in. It's an
extraordinarily complex situation," said David Moore, a commodity
strategist at Commonwealth Bank of Australia in Sydney. "The
market is digesting how the (rescue) package will work and the
implications for the U.S. economy."

      U.S. congressional leaders endorsed the plan's main thrust,
saying passage might occur in a matter of days. But they also want
independent oversight, protections for homeowners and constraints
on excessive executive compensation, House Speaker Nancy Pelosi
said Sunday.

      Treasury Secretary Henry Paulson pushed lawmakers, who received
the package on Saturday, to approve the proposal as soon as
possible.

      The Federal Reserve also announced late Sunday it granted a
request by investment banks Goldman Sachs and Morgan Stanley to
change their status to bank holding companies, a move that will
allow the two institutions to open commercial banking subsidiaries,
greatly bolstering their resources.

Gallery

Home heating worries arrive with cold weather

High oil prices likely unrelated to speculation

Oil prices spiked more than $25 a barrel Monday
-- the biggest one-day price jump ever -- as anxiety over the government's $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally.

Oil prices spike $25 a barrel on anxiety over US bailout

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