Anchorage Daily News

SIOUX FALLS, S.D. -- Oil prices jumped 10 percent Monday, pulled along by a surging Wall Street that reacted to news of a U.S. government bailout for Citigroup.

Phil Flynn, an analyst at Alaron Trading Corp., said oil initially seemed like it was heading downward, even amid talk about possible production cuts by OPEC.

OPEC President Chakib Khelil said Monday in Vienna, Austria, that if the organization met today, a cut of 1 million barrels would not be enough to support oil prices.

News that the U.S. government will take a $20 billion stake in Citigroup and guarantee hundreds of billions of dollars in risky assets gave both the stock market and oil market a boost, but Flynn said it's likely a short-term bump and he doesn't think investors are betting that the market has hit bottom.

"What we've seen in the past on these bailouts is it does give oil a boost for a while and energy a boost for a while," he said. "But as time goes on, that stimulus sort of wears off and then we go back to focusing on supply and demand."

Light, sweet crude for January delivery rose $4.57, to close at $54.50 a barrel on the New York Mercantile Exchange. Prices hit $55.30 at one point.

Alaska oil prices on West Coast open markets jumped to $49 a barrel, up $4.47 for the day. Despite the increase, the price is still in its lowest price range from the past two years.

The Dow Jones industrial average rose 397 points Monday.

Oil futures have followed stock markets recently, using equities as a proxy for economic outlook and investor sentiment.

"It's probably going to be after the first of the year before we begin to decouple and various commodities and financial instruments begin to march to the beat of their own drummer," said Jim Ritterbusch, president of energy consultants Ritterbusch & Associates.

Ritterbusch said it's premature to say oil prices have hit a bottom and it's important for investors not to read too much into two days of price action.

Oil prices have plunged from close to $150 at their peak over the summer.

"We've been forecasting $50," he said. "We've achieved it, but it just doesn't have the feel of a market that's placed a bottom."

Traders are also expressing confidence in President-elect Barack Obama's emerging economic team.

Obama plans to name New York Federal Reserve Bank President Timothy Geithner as treasury secretary, Lawrence Summers as director of the National Economic Council and New Mexico Gov. Bill Richardson as commerce secretary. Obama will be sworn in on January 20.

"The lack of clarity as to who exactly is in charge of steering the U.S. economy is really hurting the equity markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"So putting together the new team gives a bit of a reassurance to the market, even if Obama isn't president yet," he said.

Gas prices continued to drop overnight, with the national average price for regular dropping about 2 cents to $1.908 a gallon, according to according to auto club AAA, the Oil Price Information Service and Wright Express.

That is more than 80 cents gallon below what it was a month ago and more than $2 below where it was in July when prices peaked at $4.11 per gallon.

Alaska gasoline prices remain the nation's highest, averaging $2.87 a gallon on Monday, AAA said. But the price was down 7 cents from a day earlier. In Anchorage, the average price was $2.74 a gallon, down 2 cents, AAA said.

Investors are looking for signs the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, may reduce output quotas.

Venezuelan Oil Minister Rafael Ramirez said Sunday that OPEC should cut oil production by 1 million barrels per day at an informal meeting Nov. 29 meeting in Cairo.

The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on Dec. 17.

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