Oil rose more than $5 to above $100 today on expectations a comprehensive US government plan would help battered financial markets.
The US government launched several multi-billion-dollar programmes to guarantee holdings in money-market mutual funds and curb short-selling while developing a more sweeping plan to mop up toxic mortgage debt, sending global markets higher.
News of the plan helped push up U.S. crude to a session high of $103.64 a barrel and by 13.45pm it was trading $4.91 a barrel higher at $102.79. Prices were recovering from a seven-month low of $90.51 a barrel on Wednesday.
London Brent crude gained $4.65 to trade at $99.84.
"I think oil is up because there is more confidence in the financial markets. There is a feeling that the crisis is bottoming out and some may see it as a good time to buy," said Gerard Rigby, an independent energy consultant based in Sydney.
Flagging oil demand in the United States and other consumer nations, because of high fuel costs and the credit crisis, have sent crude tumbling from a record high of over $147, hit in July.
Investors who flocked to commodities as a hedge against inflation and the weak dollar have been pulling out of oil, putting additional pressure on prices.
The dollar rose against the yen today on news of the US government plan.
Continued concern over supply from the United States and Nigeria also supported crude.
Some 93 percent of oil production in the US Gulf of Mexico - the source of one-quarter of the United States' crude output - remained idled yesterday in the wake of Hurricane Ike, along with about 14.5 per cent of the country's refined fuel capacity.