| GEO Business|
| Oil prices surge on US financial rescue plan|
| Updated at: 1913 PST, Saturday, September 20, 2008|
NEW YORK: Oil prices surged Friday after the US government said it was working on a comprehensive plan to rescue the banking system, prompting traders to reassess the outlook for the economy and energy use.
New York's main contract, light sweet crude for delivery in October, jumped 6.67 dollars to close at 104.55 dollars a barrel.
In London, Brent North Sea crude for November climbed 4.42 dollars to settle at 99.61 dollars a barrel.
"Prices continue to rise as market confidence returns, buoyed by a US government rescue plan alongside ongoing supply-side disruptions," Barclays Capital oil analyst Kevin Norrish said in London.
The US Treasury, the Federal Reserve and congressional leaders said late Thursday they were putting together a comprehensive plan to ring-fence the mountains of bad debt that have weighed down banks in the past year.
Treasury Secretary Henry Paulson said Friday a rescue plan for the troubled US financial sector will cost "hundreds of billions" of dollars.
"Of course the big question is will all of this work or will we have Black Monday revisited," said Phil Flynn, analyst at Alaron Trading.
"If the market holds up will oil demand rebound and save the beleaguered demand side of the equation?" he said.
Flynn said, "I think that the moves by the Fed will save the market and oil prices may benefit in the short term. But there will still be economic fallout from this global crisis that will reduce demand."
John Kilduff, analyst at MF Global, cautioned that it would take some time for the machinations in the financial markets to be felt on the demand for oil.
"The prints on the price screens are real and indicative of the power of perception to alter reason. Since late yesterday, global markets have cast a powerful vote of confidence," Kilduff said.
Amid the financial uncertainty, the dollar fell against the euro, with the single European currency fetching about 1.45 dollars.