* U.S. proposed a $700 billion bank bailout plan
* Nigerian rebels declare unilateral ceasefire
* Oil firms, refineries to restore U.S. production after
Ike (Releads, adds details)
By Fayen Wong
PERTH, Sept 22 (Reuters) - Oil shed earlier gains and
steadied above $104 a barrel on Monday as investors reined in
initial optimism because of doubts on the working of the U.S.
government's $700 billion bank bailout plan.
Sweeping government measures to rescue the financial system
and restore confidence in shaky markets spurred a huge relief
rally across markets on Friday, when oil rose almost 7 percent
to cap its biggest three-day rally in a decade.
But on Monday, U.S. light crude for October delivery <CLc1>
fell $0.15 to $104.40 a barrel by 0340 GMT, shaving earlier
gains of as much as 90 cents, which analysts had attributed to
optimism that the bailout plan could put an end to the
financial turmoil.
The contract jumped $6.67 to settle at $104.55 a barrel on
Friday, bringing gains since Wednesday to 14.7 percent -- the
biggest three-day surge since December 1998. London Brent crude
<LCOc1> rose $0.74 to $100.35 on Monday.
"There is still a lot of turbulence in the market and there
are nagging questions on whether the $700 billion rescue plan
will bring a real recovery in U.S. financial markets," said
Toby Hassall, chief analyst at Commodities Warrants Australia.
Oil prices remain well below their peak above $147 a barrel
in mid-July, pressured by mounting evidence that high energy
costs and economic woes are undercutting global fuel
consumption.
The Bush administration and Congress on Sunday ramped up
talks the unprecedented $700 billion bank bailout to prevent
further financial turmoil that risks hurtling the economy into
a deep and damaging recession. []
The news sparked a rally across equities markets in Asia,
where Tokyo's Nikkei average rose 2.5 percent and Australia's
benchmark S&P/ASX 200 index gained over 3 percent, but Hong
Kong's Hang Seng Index <> later reversed course as
investors anticipate a weak trading session in Wall Street
tonight.
Analysts said oil's movements were expected to remain
highly volatile as traders continue to shift their attention
between rumblings in the financial markets, movements in the
U.S. dollar, threats to crude supply and signs of slowing
demand.
Ructions in the U.S. financial system, which saw the
collapse of investment bank Lehman Brothers <LEH.N>, insurer
AIG <AIG.N> bailed out by the government and Merrill Lynch
<MER.N> forced to sell itself to Bank of America <BAC.N>, have
raised questions about the stability of the U.S. economy -- a
factor that helped push oil to a seven-month low of $90.51 a
barrel last week.
Nippon Oil Corp <5001.T>, Japan's biggest oil refiner, said
on Monday it has cut its crude oil refining volume for
September by 240,000 kilolitres from its original plan to 3.22
million kl due to slow demand. []
Oil's rise on Monday were also limited 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.
[]
The week-long attack on oil facilities forced Shell to
declare on Saturday a second force majeure on crude oil
shipments from Nigeria. []
Analysts said the restart of oil and gas production in U.S.
Gulf of Mexico as well as refineries in Texas city could also
limit oil's gains.
About a quarter of U.S. Gulf of Mexico natural gas output
and 11 percent of oil production were back on line Friday as
recovery from Hurricanes Gustav and Ike continued
[], while eleven U.S. oil refineries along the
Gulf Coast were also back to normal operations.
[]
(Reporting by Fayen Wong; Editing by Sambit Mohanty)
