* U.S. proposes a $700 billion bank bailout plan
* Nigerian rebels declare unilateral ceasefire
* Oil firms, refineries to restore U.S. production after
Ike (Releads, updates prices)
By Fayen Wong
PERTH, Sept 22 (Reuters) - Oil extended last week's massive
gains and rose above $105 a barrel on Monday, on hopes that the
U.S. government's $700 billion rescue plan would restore
stability in the financial system and support global energy
demand.
Sweeping government measures to rescue the financial system
and restore confidence in shaky markets spurred a huge relief
rally across markets on Friday, when oil rose almost 7 percent
to cap its biggest three-day rally in a decade.
U.S. light crude for October <CLc1> delivery rose $0.64 to
$105.19 a barrel by 0733 GMT, rebounding from earlier losses of
as much as $1.20 which analysts attributed to worries about the
workings of the rescue plan.
The contract jumped $6.67 to settle at $104.55 a barrel on
Friday, bringing gains since Wednesday to 14.7 percent -- the
biggest three-day surge since December 1998. London Brent crude
<LCOc1> rose $1.17 to $100.78 on Monday.
"There is still a lot of turbulence in the market and there
are nagging questions on whether the $700 billion rescue plan
will bring a real recovery in U.S. financial markets," said
Toby Hassall, chief analyst at Commodities Warrants Australia.
"Prices will remain volatile with traders shifting their
attention between rumblings in the financial markets, movements
in the U.S. dollar, threats to crude supply and signs of
slowing demand."
Oil prices remain well below their peak above $147 a barrel
in mid-July, pressured by mounting evidence that high energy
costs and economic woes are undercutting global fuel
consumption.
The Bush administration and Congress on Sunday ramped up
talks the unprecedented $700 billion bank bailout to prevent
further financial turmoil that risks hurtling the economy into
a deep and damaging recession.
Ructions in the U.S. financial system, which saw the
collapse of investment bank Lehman Brothers <LEH.N>, insurer
AIG <AIG.N> bailed out by the government and Merrill Lynch
<MER.N> forced to sell itself to Bank of America <BAC.N>, have
raised questions about the stability of the U.S. economy -- a
factor that helped push oil to a seven-month low of $90.51 a
barrel last week.
Nippon Oil Corp, Japan's biggest oil refiner, said on
Monday it has cut its crude oil refining volume for September
by 240,000 kilolitres from its original plan to 3.22 million kl
due to slow demand.
Oil's rise on Monday were also limited 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 which cut output in Africa's top producer.
The week-long attack on oil facilities forced Shell to
declare on Saturday a second force majeure on crude oil
shipments from Nigeria.
Analysts said the restart of oil and gas production in U.S.
Gulf of Mexico as well as refineries in Texas city could also
limit oil's gains.
About a quarter of U.S. Gulf of Mexico natural gas output
and 11 percent of oil production were back on line Friday as
recovery from Hurricanes Gustav and Ike continued, while eleven
U.S. oil refineries along the Gulf Coast were also back to
normal operations.
(Reporting by Fayen Wong; Editing by Clarence Fernandez)
