Oil Rises a Second Day on Signs U.S. Will Revive Bailout Plan

By Christian Schmollinger and Grant Smith

Oct. 1 (Bloomberg) -- Crude oil rose for a second day after U.S. lawmakers said they intend to salvage a $700 billion bank- rescue package that may avert an economic slowdown.

The U.S. Senate plans to vote on a revised bailout plan tonight. Oil gained and U.S. equities jumped the most in six years yesterday, recovering after the failure to pass a rescue bill on Sept. 29. An Energy Department report later today will probably show fuel supplies fell last week because of storm- related production losses.

``The hope that a bailout will still be agreed is restoring some calm to equity and other financial markets,'' said Andrey Kryuchenkov, an analyst at London-based Sucden (U.K.) Ltd. ``Oil is benefiting from this and from the realization that it was oversold during the panic.''

Crude oil for November delivery rose as much as $1.60, or 1.6 percent, to $102.24 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $101.92 a barrel at 8:58 a.m. London time. Futures are down 31 percent from the record $147.27 a barrel reached on July 11.

Futures fell 28 percent in the third quarter, the largest drop since 1991. Oil slumped $10.52, or 9.8 percent, to $96.37 a barrel, on Sept. 29, the most in percentage terms since Nov. 15, 2001, as the Standard & Poor's index of 500 stocks tumbled the most since the 1987 crash.

U.S. Stockpiles

The Standard & Poor's 500 Index rose 58.35 points, or 5.3 percent, yesterday to 1,164.74, its biggest rally since July 2002.

U.S. gasoline stockpiles probably fell 2.05 million barrels in the week ended Sept. 26 from 178.7 million barrels in the previous week, according to the median of 13 analyst estimates before an Energy Department report today. Supplies in the week ended Sept. 19 were the lowest since 1967. Inventory levels prior to 1990 were reported on a monthly basis.

``People need to be wary about the supplies we have available,'' said Mark Hansen, director of trading at CPM Group in New York, in a Bloomberg Television interview. ``That's something that could come back to bite us in the winter because we could see an uptick in demand and be totally unprepared for it.''

Crude inventories are expected to rise 2.75 million barrels from 290.1 million barrels a week earlier, the analysts said.

Refineries, production platforms and ports along the Gulf of Mexico were shut this month because of hurricanes Gustav and Ike. Operating rates at U.S. processors may rise 5.5 percentage points from 66.7 percent in the week ended Sept. 19.

The Department of Energy will release the inventory report at 10:35 a.m. local time in Washington, D.C.

Brent crude oil for November settlement rose as much as $1.37, or 1.4 percent, to $99.54 a barrel on London's ICE Futures Europe exchange. It was at $99.01 at 9:04 a.m. London time. The contract yesterday gained $4.19, or 4.5 percent, to settle at $98.17 a barrel.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net. Grant Smith in London at gsmith52@bloomberg.net