Oil price posts largest-ever one-day gain

At one point, light sweet crude for October delivery traded more than $25 higher than its Friday close; it ended the day at $120.92 a barrel, up $16.37. The jump reflected the frenzied shift in money throughout financial markets as investors digested the ramifications of the Federal Reserve's still-developing $700-billion bailout of companies hobbled by soured mortgage investments.

With a massive government outlay in the works, the value of the dollar plunged, triggering a flight to commodities such as oil.

Phil Flynn, vice president and senior market analyst for Alaron Trading Co. in Chicago, said he thought the surge in crude oil futures today would be short-lived.

"Today, it's all about the dollar, but that should stabilize," he said. "I think oil could go as high as $120, but this is not sustainable in the long run."

Fadel Gheit, senior energy analyst for Oppenheimer & Co., said "people are seeing the bailout today as the fleecing of America. They are expecting the dollar to sink even more, and there is no place for the investment money to go except back into commodities and oil."

Gheit added that the market was back to being driven by something other than traditional forces, at least in the short run. "This is not oil responding to supply and demand fundamentals," he said.

Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey, said there was some hope that the November futures contract reflected a more realistic price for crude. That contract, which became the front-month contract after today's session, closed up a more modest $6.62 at $109.37 a barrel.

The gap between the October and November prices was a sign that this was "an anomalous day, untethered from physical reality," Kloza said. If not, "it's looking like crude oil could end the year trading at $125 instead of $90."

ron.white@latimes.com

elizabeth.douglass@latimes.com