Oil Gains a Third Day as Bank-Bailout Plan Boosts Stock Market

By Grant Smith

Sept. 19 (Bloomberg) -- Crude oil rose for a third day, following equities higher as government measures to resolve the bank crisis drew investors back to financial markets.

Oil advanced above $100 and stock markets surged worldwide after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're putting together plans to halt the credit-market seizure. Output disruptions from rebel attacks in Nigeria and hurricane shutdowns in the U.S. have raised concern that oil supplies are constrained.

``Oil has been drawing strength from other markets like stocks, where central banks have helped restore confidence,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``This level of violence in Nigeria would be sending prices even higher if demand fundamentals weren't so bearish.''

Crude for October delivery gained as much as $2.88, or 2.9 percent, $100.76 a barrel on the New York Mercantile Exchange. It was at $100.26 at 12:27 p.m. London time.

In Nigeria, Royal Dutch Shell Plc warned that this week's escalation in rebel attacks would hurt earnings. The country has lost about 280,000 barrels a day from recent attacks on top of production already shut-in, an official with the state-owned oil company said Sept. 17.

The latest raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' Shell spokesman Rainer Winzenried said in an e- mailed statement today.

`Obvious Impact'

``Oil has gotten support from the supply-side issues,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``There is the obvious impact of the hurricane activity on U.S. production and inventories. Nigeria remains an area of potential risk.''

While the supply disruption in Nigeria intensified, Iraq restored normal crude pumping to its Basra Oil terminal after an unspecified malfunction cut loadings in half, two people involved in shipping the crude said. The facility on the Persian Gulf handles most of the nation's exports.

U.S. energy companies in the Gulf of Mexico have about 1.2 million barrels a day, or 93 percent of oil production, and 5.7 billion cubic feet a day of natural gas, or 78 percent, idled after Hurricanes Gustav and Ike, the U.S. Minerals Management Service, said yesterday on its Web site.

Emergency Stockpiles

The International Energy Agency's Executive Director Nobuo Tanaka said today the agency will decide soon on releasing emergency stockpiles because of hurricane damage.

Oil, which fell more than $10 a barrel earlier this week as Lehman Brothers Holdings Inc. filed for bankruptcy, has since recouped most of its losses and is headed for a weekly decline of 1.8 percent. It's down 33 percent from a record $147.27 a barrel reached on July 11.

Brent crude oil for November settlement rose as much as $2.73, or 2.9 percent, to $97.92 a barrel on London's ICE Futures Europe exchange. It was trading at $97.39 a barrel at 12:26 p.m. London time.

``There was a positive reaction to the talk of increasing liquidity from the U.S. Fed and also the central banks in Europe and Asia,'' Gerard Burg, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``That kind of coordinated approach gave some confidence to the markets.''

The Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987, adding 6.4 percent to 273.31 at 11:49 a.m. in London. U.S. stocks rallied the most in six years yesterday on the prospects for the government plan to shore up financial markets, while regulators and pension funds took steps to curb bets against banks and brokerages.

The Dow Jones Industrial Average jumped 617 points from its low of the day and the Standard & Poor's 500 Index climbed 4.3 percent.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net