Oil spikes more than $11 on banking rescue plan

Oil rose more than 10 percent on Monday -- the biggest one-day gain in a decade -- continuing a rally sparked by the United States' rescue plan for its financial sector.

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.

U.S. crude for October delivery, which expires Monday, rose $11.38 or 10.9 percent, to to 115.93, a barrel by 1740 GMT -- the biggest gain since June 22, 1998.

London Brent crude traded up $6.11 to $105.72.

"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.

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 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, remains 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 ceasefire on Sunday after a week of clashes with the military and attacks on oil installations which cut output in Africa's top producer.