* Oil up on Oct. futures expiry, weak dollar
* U.S. oil sector recovering from Ike
* Saudi Arabia trims oil supply to majors
(Adds detail on US oil demand in paragraph 10)
By Richard Valdmanis
NEW YORK, Sept 22 (Reuters) - Oil prices soared nearly 16
percent to over $120 a barrel on Monday -- the biggest one-day
gain on record -- in a rally sparked by the expiry of the
front-month futures contract and weakness in the U.S. dollar.
The gains extend oil's climb from a low near $90 last week
after the United States unveiled a sweeping rescue plan for its
battered financial sector, improving the outlook for energy
demand in the world's biggest consumer nation.
U.S. crude for October delivery <CLc1>, which expires on
Monday, settled up $16.37, or 15.7 percent, at $120.92 per
barrel. The contract for delivery in November, which was much
more actively traded, was up only $6.62 at $109.37.
London Brent crude <LCOc1> settled up $6.43 at $106.04.
"The market went crazy here and it looks like the weakness
of the dollar was a fuel for the sharp price increase. NYMEX
October crude was also expiring and that provoked
short-covering," said Amanda Kurzendoerfer, commodities analyst
at Summit Energy in Louisville, Kentucky.
The U.S. dollar fell 2 percent against the euro on Monday,
weighed down by worries about the fiscal impact of the U.S.
government's $700 billion bailout plan aimed at addressing the
global credit crisis.
A weaker dollar boosts the purchasing power of commodity
buyers using other currencies.
The U.S. government measures to rescue the financial system
also have restored confidence that U.S. fuel demand may hold up
to economic turmoil better than initially feared.
"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.
Since hitting record highs above $147 a barrel in mid-July,
oil prices had tumbled as evidence mounted that high energy
costs and economic woes were undercutting global fuel demand.
U.S. oil demand is running about 4 percent below last year,
according to the latest government data.
The slow recovery of the U.S. oil sector after Hurricane
Ike also supported prices on Monday, after causing the biggest
disruption to the nation's energy supplies since 2005.
Nearly 80 percent of oil production in the U.S. Gulf of
Mexico, home to a quarter of all U.S. oil output, remained shut
along with seven refineries.
Oil prices also were 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 top oil exporter Saudi Arabia
has trimmed oil supplies to major international oil companies
and U.S. refiners since the start of September. []
(Additional reporting by Joe Brock, Matthew Robinson, David
Sheppard in London; Fayen Wong in Perth; Robert Gibbons,
Rebekah Kebede and Eileen Moustakis in New York; Editing by
David Gregorio)
