Oil spikes to $101.45 on bailout revival hopes

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Oil falls below USD 52 per barrelOil falls towards USD 53 per barrelOil falls towards USD 53 per barrelOil rises to above USD 51 per barrel

Perth, October 1: : Oil extended its rally and rose over $1 on Wednesday to hover around $102 a barrel, buoyed by hopes that Washington would find a way to pass a rescue plan to head off a deep recession in the United States and abroad.

The US Senate agreed to vote on the bailout package on Wednesday night that will include an increase in the amount of bank deposits insured, a Senate aide said on Tuesday.

US light crude for November delivery rose 81 cents to $101.45 a barrel by 0118 GMT, after rising as much as $1.60 at the start of electronic trading. The contract settled $4.27 higher at $100.64 on Tuesday in a relief rally.

London Brent crude rose 84 cents to $99.01.

"There is a strong belief that the US Congress will pass the rescue plan in a few days, so that's supporting prices," said Ryuichi Sato, an analyst at Mizuho Corporate Bank in Tokyo.

"But the fundamentals for the US financial markets haven't changed so there is still a lot of downside risk in that regard."

Oil's rebound comes after its steep tumble on Monday, when it dropped $10.52 in the second-biggest fall since April 23, 2003, as fear gripped financial markets after US lawmakers rejected the $700 billion bailout plan.

But US stocks, the dollar and oil prices have since strengthened on renewed optimism that US lawmakers would soon reach a deal on a financial rescue plan.

US securities regulators gave the financial industry a reprieve on Tuesday from marking hard-to-value assets down to fire sale prices, a move which threw a lifeline to an industry beset by strained credit markets and a series of bank failures.

Still, analysts said that expectations of a rise in US crude inventories, along with signs that the financial crisis has spread to Europe and erode energy demand further, would keep a check on prices.

"Prices over the coming months look vulnerable to a further weakness, as sentiment continues to plummet on a weakening demand backdrop," said Mark Pervan, a resource analyst at Australia & New Zealand (ANZ) bank based in Melbourne.

A Reuters poll of analysts ahead of weekly US government inventory data due out on Wednesday predicted crude stockpiles in the world's top consumer rose 2.4 million barrels in the week to Sept. 26. Analysts forecast distillates fell by 1.2 million barrels while gasoline inventories were seen down 1.6 million barrels.