Crude rises more than $3 on governments' rescue plans

Global markets powered ahead, with European and Asian markets following Wall Street's lead after governments around the world bet hundreds of billions of dollars to shore up ailing banks.

 

U.S. crude gained $3.11 to $84.30 a barrel by 1000 GMT, just off a session high of $84.53, as concerns over the impact of the financial crisis on oil demand eased.

 

 London Brent crude rose $2.60 to $80.06.

 

"I think oil prices are being heavily influenced by financial markets but this is by no means a total cure, it is glimmer of hope. I don't think anyone thinks the economic crisis is over," said Tony Machacek at Bache Financial.

 

Federal Reserve Chairman Ben Bernanke said in an editorial in the Wall Street Journal that new U.S. measures to aid the financial system would help restore normality to markets, without giving details of the plan, to be announced later on Tuesday.

 

The bailout schemes saw the dollar fall against the euro, further boosting dollar-denominated oil prices.

 

Commodities bull Goldman Sachs on Monday cut its year-end U.S. crude oil target to $70 a barrel, down from a previous forecast of $115, slashed its average 2009 forecast by a third to $86, and warned that prices could hit $50 if the current financial crisis worsened.

 

A looming global recession could make even aggressive members of the Organization of the Petroleum Exporting Countries (OPEC) more tolerant of cheaper oil, but the group still needs to cut output by early next year to control swelling stocks and insure against a price collapse.

 

Iraq's Oil Minister Hussain al-Shahristani said on Monday that OPEC would consider reducing output if the world does not need its oil.

 

As global markets cheered the government bailouts, oil traders will also look at the weekly U.S. petroleum inventory data to be released on Thursday.

 

Preliminary analyst forecasts have called for a 2.4 million barrel build in crude stocks, a 3.2 million barrel increase in gasoline supplies and a 0.8 million barrel rise in distillates.