Oil rebounds near $95 after sell-off

By Annika Breidthardt

SINGAPORE (Reuters) - Oil rebounded to nearly $95 a barrel on Wednesday, after two days of free fall, as an $85 billion bailout of American International Group sparked a relief rally on Wall Street.

Fresh attacks on Nigerian oil installations and supply disruptions in the United States after Hurricane Ike crashed through the Gulf of Mexico last week also supported prices, as did expectations of a drop in U.S. crude oil and products stocks.

U.S. light crude for October delivery rebounded $3.71 to $94.86 a barrel at 0731 GMT (8:31 a.m.) after climbing earlier to $95.00. On Tuesday, they fell to a seven-month low in a broad cross-market sell-off, a more than $10 drop from Friday's close.

London Brent crude for November delivery climbed $3.64 to $92.86 at the same time.

Oil futures are now little changed from the start of the year but slowing demand due to economic weakness in the United States and other top consumer nations has sent them tumbling more than 35 percent from the record high above $147 hit in mid-July.

"Everyone feared there would be a big meltdown in the financial sector that would affect the economy. Now they are hoping we'll just get through the AIG situation and that may be lifting the market," said Anthony Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.

The U.S. government agreed to rescue AIG, preventing the world's biggest corporate bankruptcy just days after investment bank Lehman's collapse threw global markets into turmoil.

The Fed will provide AIG a bridge loan of $85 billion and take an 80 percent stake in the firm, defusing the immediate risk of a financial system meltdown but burdening the U.S. taxpayer more following previous government bailouts.