Oil prices soar $25 per barrel

Investors are rushing into oil and gold.

NEW YORK (AP) — Oil prices spiked more than $25 a barrel Monday — the biggest one-day price jump ever — as anxiety over the government’s $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally.

Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37. The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.

Still, the rally, which shattered crude’s previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market. The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit. Trading resumed seconds later after the daily limit was increased.

The November crude contract, which became the front-month contract at the end of Monday’s session, settled at $109.37, up $6.62, still a very sharp gain.

Phil Flynn, analyst and oil trader with Alaron Trading Corp. in Chicago, said the late-session surge in oil appeared to be the result of a large investment fund scrambling to cover their short positions, or bets that prices would fall.

“When people sense that someone is short, it’s like blood on the streets. It just accelerates the rally,” Flynn said.

In other trading, gold prices shot up more than $44.30 to settle at $909 an ounce, and other safe-haven commodities also rallied, underscoring investors’ uncertainly about the direction of the economy and their fear of more turmoil ahead.