Oil rebounds from 13-month low

NEW YORK (AP) -- Oil prices clawed back above $80 a barrel Monday, rebounding from a 13-month low as a stepped up global effort to rescue world financial markets lured investors back into equity and commodities markets.
Prices were also supported by a weaker dollar and expectations that OPEC countries may tighten production in a bid to slow crude's precipitous decline; prices have fallen about 45 percent since shooting to a record $147.27 on July 11. Last week, crude tumbled more than $16 to levels not seen since September 2007, with over half the losses coming on Friday alone.
Investors appeared calmer Monday after European leaders agreed overnight to a raft of new measures aimed at strengthening the battered financial sector, including debt guarantees, recapitalizing banks and new oversight measures.
Meanwhile in Washington, Treasury Secretary Henry Paulson said his office would work quickly to implement a $700 billion bank rescue plan, including a new measure to buy equity in struggling banks, rather than just their soured mortgage-related assets.
The Dow Jones industrial average shot up over 500 points in midday trading, snapping back from last weeks' devastating losses.
"The oil market really can't ignore these huge daily price swings in the stock market. When the stock market settles down, we can go back to trading oil on fundamentals rather than just broadbased economic deterioration," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Light, sweet crude for November delivery rose $3.69 to $81.39 a barrel on the New York Mercantile Exchange, after earlier rising as high as $82.52. The contract fell Friday $8.89 to $77.70, the lowest price since Sept. 10, 2007.
Falling oil prices have helped drive pump prices down sharply. A gallon of regular sank a whopping 4.1 cents overnight to a new national average of $3.206, according to auto club AAA, the Oil Price Information Service and Wright Express.
Seven states are now seeing average prices below $3 a gallon, including Kansas, Missouri and Ohio. Gas prices should come down even more as U.S. Gulf Coast energy infrastructure continues ramping up operations after closures caused by Hurricane Ike.
Though recovery in oil prices was to be expected after last week's steep decline, analysts doubted Monday's rally had relieved the intense downward pressure on crude.
"In this market, a $4 move in either direction really doesn't signal anything," said Stephen Schork, an oil analyst and trader in Villanova, Pa. "I wouldn't be surprised if we give this rally back later in the day."
Crude's steep pullback has caught some market observers off guard. Goldman Sachs, which for weeks maintained a bullish outlook on oil even as prices collapsed, on Monday cut its year-end crude price forecast from $115 a barrel to $70, citing the "extreme dislocation" in the credit markets.
"We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand," Goldman said.
Investors are watching for signs that the Organization of the Petroleum Exporting Countries may cut production at an extraordinary meeting in Vienna on Nov 18.
Iranian Oil Minister Gholam Hossein Nozari on Saturday called for stability in the oil market, saying the biggest challenge now was a decline in oil demand because of a global economic recession.
"There won't likely be any overt cuts, but there could be an informal tweaking of production that could provide support for prices," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "It's politically unacceptable for OPEC to make cuts in the middle of a global deceleration."
In other Nymex trading, heating oil futures rose by 10.36 cents to $2.3136 a gallon, while gasoline prices gained 7.26 cents to $1.8796 a gallon. Natural gas for November delivery rose 14.8 cents to $7.337 per 1,000 cubic feet.
In London, November Brent crude rose $2.12 to $76.21 a barrel on the ICE Futures exchange.