Sept. 19 (Bloomberg) -- Crude oil rose, capping the biggest three-day rally in almost a decade, on speculation government measures to resolve the bank crisis will spur the economy and bolster petroleum demand.

Oil climbed 6.8 percent today and stock markets surged after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're making plans to halt the credit-market seizure. Output disruptions from hurricanes in the U.S. and attacks in Nigeria have constrained oil supplies.

``There's a bullish lean to the market, and that will remain until the imports and inventories start to pick up,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Crude for October delivery increased $6.67 to settle at $104.55 a barrel at 2:52 p.m. on the New York Mercantile Exchange. Earlier, futures rose 7.4 percent to touch $105.25 a barrel, the highest since Sept. 9. Oil rose 15 percent since Sept. 16, the biggest three-day rally since December 14-16, 1998, when the price averaged $11.74 a barrel.

The October crude oil contract expires Sept. 22, and traders were buying oil to cover so-called short positions, or bets that the price will fall, said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago.

``People were waiting to cover shorts at the last minute because, really, if the Fed didn't bail us out on oil today, people could have waited until Monday,'' he said. ``We went from ultimate fear to euphoria overnight.''

Stocks Rise

The Dow Jones Industrial Average rose 3.4 percent to 11,388, as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.

Adding to the volatility, trading on U.S. stock and options exchanges was above average because futures and options on indexes and individual stocks expired at the close of trading. So-called quadruple witching occurs once every three months.

``Oil has been drawing strength from other markets like stocks, where central banks have helped restore confidence,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London.

Oil may rise next week amid low U.S. inventories in the wake of hurricanes Ike and Gustav, according to a survey of 30 analysts by Bloomberg News. Fourteen, or 47 percent, said prices will increase through Sept. 26. Ten, or 33 percent, said crude will fall and six said prices would be little changed.

`Opportunity to Buy'

``There seems to be a feeling that maybe some of the problems have been rectified by actions taken in the past 24 hours, and that's giving the bulls an opportunity to buy, at least for the time being,'' said Peter Beutel, president of Cameron Hanover Inc. in Stanford, Connecticut.

U.S. energy companies have resumed about 11 percent of oil production and a quarter of natural-gas output in the Gulf of Mexico after shutting almost all of it before the hurricanes, the U.S. Minerals Management Service said today on its Web site. The Gulf accounts for about 26 percent of U.S. oil production and 14 percent of natural gas output.

The U.S. won't ask the International Energy Agency for emergency fuel supplies to offset disruptions from the hurricanes, Energy Department spokeswoman Healy Baumgardner said today in a telephone interview.

``Oil has gotten support from the supply-side issues,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``There is the obvious impact of the hurricane activity on U.S. production and inventories. Nigeria remains an area of potential risk.''

Nigeria

In Nigeria, Royal Dutch Shell Plc warned that this week's escalation in militant attacks would hurt earnings. The country has lost about 280,000 barrels a day from the violence on top of production already shut-in, an official with the state-owned oil company said Sept. 17.

The latest raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' Shell spokesman Rainer Winzenried said in an e-mailed statement today.

Oil, which fell more than $10 a barrel earlier this week as Lehman Brothers Holdings Inc. filed for bankruptcy, recouped its losses to increase 3.3 percent this week, the first weekly increase since August. It's down 29 percent from a record $147.27 a barrel reached on July 11.

Brent crude oil for November settlement rose $4.42, or 4.6 percent, to $99.61 a barrel on London's ICE Futures Europe exchange. It touched $100.50 a barrel earlier.

Gasoline for October delivery rose 11.73 cents, or 4.7 percent, to $2.5997 a gallon on the Nymex.

Regular gasoline, averaged nationwide, fell 2.8 cents to $3.807 a gallon, AAA, the nation's largest motorist organization, said today on its Web site.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: September 19, 2008 18:13 EDT