* Oil continues rally on Oct. futures expiry, U.S. rescue plan
* Saudi trims oil supply to majors
* Nigerian rebels declare unilateral cease-fire
* U.S. oil sector recovering from Ike
(Recasts, updates prices)
By Joe Brock
LONDON, Sept 22 (Reuters) - Oil rose soared over 20 percent on Monday
-- the biggest one-day gain on record -- continuing a rally sparked by the
expiry of the front-month futures contract and the United States' rescue
plan for its financial sector.
U.S. crude for October delivery, which expires Monday <CLc1>, last
traded up $21.95 or 20.99 percent at $126.50 per barrel. The contract for
delivery in November was up only about $6 in much more active trade.
London Brent crude <LCOc1> traded up $6.03 at $105.64 at 2:36 p.m.
(1836 GMT).
"Short squeeze, crude expiration -- that's it in a nutshell. The dollar
did drop further today, but you'll note that the October-November crude
spread blew way, way out," Tom Knight of Truman Arnold in Texas said.
Sweeping government measures to rescue the financial system and restore
confidence in shaky markets spurred gains across markets on Friday, when
oil rose almost 7 percent to cap its biggest three-day rally in a decade.
Oil has tumbled from record highs over $147 a barrel in mid-July,
weighed down by growing evidence that high energy costs and economic woes
were undercutting global fuel demand.
Further pressure came last week as financial sector turmoil sent
investors out of commodities and into safer havens, sending oil to a
seven-month low of $90.51 a barrel.
"The key driver continues to be the U.S. rescue package which has
changed the sentiment in the oil market," said Bank of Ireland analyst Paul
Harris.
The slow recovery of the U.S. oil sector after Hurricane Ike also
supported prices, after causing the biggest disruption to the nation's
energy supplies since 2006.
Nearly 90 percent of oil production in the U.S. Gulf of Mexico, home to
a quarter of all U.S. oil output, remained shut along with seven
refineries. []
Oil prices were also supported by news China increased crude imports
11.54 percent in August from a year earlier, recovering from a steep July
fall, the General Administration of Customs said on Friday, confirming
earlier data. []
"The Chinese import news is a sign of recovery, and a good indication
that oil prices could get back up again." said Christopher Bellew of Bache
Financial.
Industry sources also said on Monday that top oil exporter Saudi Arabia
has trimmed oil supplies to international majors and U.S. refiners since
the start of September. []
However, gains were capped by news that Nigeria's main militant group
had begun a unilateral cease-fire on Sunday after a week of clashes with
the military and attacks on oil installations which cut output in Africa's
top producer. []
(Reporting by Joe Brock, Matthew Robinson, David Sheppard in London;
Fayen Wong in Perth; Richard Valdmanis in New York; Editing by
Marguerita Choy)
