Oil rises on U.S. crisis plan, supply concern

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke plan to work through the weekend with Congress on a plan to deal with toxic bank assets choking the financial system.Â

News of the plan helped push U.S. crude up $1.39 to $99.27 a barrel by 5:06 a.m. EDT, adding to gains that have lifted prices from a seven-month low of $90.51 a barrel on Wednesday.

London Brent crude gained $1.37 to trade at $96.56 a barrel.

"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 due to high fuel costs and the credit crisis have sent crude tumbling from record highs 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 on Friday on news of the U.S. government plan.

SUPPLY CONCERNS
Continued concern over supply from the United States and Nigeria also supported crude.

"Traders will continue to alternate focus between the financial markets, which could result in further demand destruction, dollar movements as well as production out of the U.S. Gulf of Mexico," said Gerard Burg, a resource analyst at the National Australian Bank in Melbourne.

Some 93 percent of oil production in the U.S. Gulf of Mexico -- source of a quarter of the nation's crude output -- remained idled on Thursday in the wake of Hurricane Ike along with about 14.5 percent of the nation's refined fuel capacity.

Militants in OPEC member Nigeria said they had attacked another oil pipeline in the Niger Delta. The Movement for the Emancipation of the Niger Delta (MEND), which has declared an "oil war" against the sector and military, said it used explosives to sabotage a Royal Dutch Shell-operated pipeline at the Cawthorne Channel in Rivers state.

Asia's top refiner, Sinopec, plans to reduce crude oil imports by 8-10 percent from the amount originally planned for the rest of the year, while cutting crude through-put due to ample domestic fuel supplies.