VIENNA, Austria - A pledge by European countries to keep banks from collapsing injected optimism into oil markets Monday, with prices rebounding from a 13-month low to rise above US$80 a barrel. Gasoline and heating oil also recorded substantial gains.
The market was also supported by OPEC's decision to call a special meeting next month amid members' concerns about prices that have fallen about 45 percent since soaring to a record $147.27 on July 11.
Light, sweet crude for November delivery was up US$3.82 to US$81.52 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract fell Friday $8.89 to $77.70, the lowest price since Sept. 10, 2007.
"The turnaround in oil today is due primarily to the European bank rescue plan," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "It's a shot in the arm, though it's too early to know if this will restore confidence to the credit markets."
Vienna's JBC Energy noted that the joint European decision "injected some optimism into markets."
In other Nymex trading, heating oil futures rose by more than 9 cents to US$2.30 a gallon, while gasoline prices gained more than 8 cents to fetch US$1.89 a gallon. Natural gas for November delivery rose by more than 12 cents to US$6.66 per 1,000 cubic feet (28 cubic meters).
In London, November Brent crude rose US$3.26 to US$77.35 a barrel on the ICE Futures exchange.
At an emergency summit of leaders of the 15 euro-zone countries in Paris on Sunday, European governments agreed to guarantee new bank debt until the end of 2009, allowed governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization.
Individual governments will announce how they will implement the measures.
The plan follows Britain's US$88 billion plan to partly nationalize major banks and promise to guarantee a further US$438 billion of loans to shore up the banking sector.
U.S. lawmakers Sunday urged quick action by President George W. Bush on measures to make direct purchases of bank stock to help unlock lending. Treasury Secretary Henry Paulson has indicated the administration will use part of the recent US$700 billion bailout Bush signed Oct. 3 to have the government take ownership stakes in banks.
The administration has not indicated when it would announce its next steps.
"These rescue plans will not prevent a global economic slowdown, but they may ease the pain," Shum said. "I expect further downward volatility in the oil market, though talk of US$50 or US$60 is extreme."
Investors are watching for signs that the Organization of Petroleum Exporting Countries may cut production at an extraordinary meeting in Vienna next month. Iranian Oil Minister Gholam Hossein Nozari on Saturday called for stability in the oil market, saying the biggest challenge now was a decline in oil demand because of a global economic recession.
"There won't likely be any overt cuts, but there could be an informal tweaking of production that could provide support for prices," Shum said. "It's politically unacceptable for OPEC to make cuts in the middle of a global deceleration."