Oil's wild ride

NEW YORK Oil prices spiked more than $25 a barrel Monday - the biggest one-day price jump ever - as anxiety over the government's $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally.

Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37. The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.

Ben Shepperd, executive vice president of the Permian Basin Petroleum Association, said markets could be catching up with shut-ins caused at Texas refineries by Hurricane Ike.

"This is just evidence we're seeing volatile economic times," he said.

The rally, which shattered crude's previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market.

The November contract, scheduled to become the front-month contract at the end of Monday's session, was trading at $108.69, up $5.94.

Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide below $100. At this rate, crude is within striking distance of its all-time record of $147.27, reached in July.

Shepperd said last week's drop was likely a reaction to problems in other areas of the economy.

"I think we will start to see that price inch up," he said. "When it went into the $90s, that was partially to do with the stock market taking everything down with it."

For the Permian Basin, Shepperd said the economy should remain strong through next year.

"The fundamentals of our West Texas economy are solid," he said.

In other trading, gold prices shot up more than $40 and other safe-haven commodities also rallied, underscoring investors' uncertainly about the direction of the economy and their fear of more turmoil ahead.

"We're off to the races again," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "There's a renewed scramble for commodities because of a general weakness in the dollar."

The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit. Trading resumed seconds later after the daily limit was increased.

OA staff writer Geoff Folsom contributed to this report.