Oil extended last week?s massive gains and rose above $105 a barrel yesterday, on hopes that the US government?s $700 billion rescue plan would restore stability in the financial system and support global energy demand. Sweeping government measures to rescue the financial system and restore confidence in shaky markets spurred a huge relief rally across markets on Friday, when oil rose almost 7 % to cap its biggest three-day rally in a decade.

US light crude for October delivery rose $0.64 to $105.19 a barrel by 3:33 a.m. EDT, rebounding from earlier losses of as much as $1.20 which analysts attributed to worries about the workings of the rescue plan. The contract jumped $6.67 to settle at $104.55 a barrel last Friday, bringing gains since Wednesday to 14.7 % ? the biggest three-day surge since December 1998. London Brent crude rose $1.17 to $100.78 yesterday.?There is still a lot of turbulence in the market and there are nagging questions on whether the $700 billion rescue plan will bring a real recovery in US financial markets,? said Toby Hassall, chief analyst at Commodities Warrants Australia.?Prices will remain volatile with traders shifting their attention between rumblings in the financial markets, movements in the US dollar, threats to crude supply and signs of slowing demand.?

Oil prices remain well below their peak above $147 a barrel in mid-July, pressured by mounting evidence that high energy costs and economic woes are undercutting global fuel consumption.The Bush administration and Congress on Sunday ramped up talks the unprecedented $700 billion bank bailout to prevent further financial turmoil that risks hurtling the economy into a deep and damaging recession.