Oil rises 2 percent on China rescue plan and Saudi cuts

By Edward McAllister

NEW YORK (Reuters) - Oil rose 2 percent on Monday as Saudi Arabia's move to cut supplies and China's launch of a $600 billion (384 billion pounds) economic stimulus plan offset concerns about the global economy.

U.S. crude settled up $1.37 at $62.41 a barrel, while London Brent crude gained $1.73 to settle at $59.08.

Earlier, recession worries had pushed oil lower and U.S. stocks fell as General Motors shares slumped, Fannie Mae reported a record $29 billion loss.

"A positive move by the Chinese to offer a major stimulus package was being offset by ongoing economic concerns, causing cross currents, providing traders with another wild ride as intraday volatility remained high," said Chris Jarvis, senior analyst at Caprock Risk Management in New Hampshire.

The U.S. government restructured its bailout of American International Group Inc (AIG.N) on Monday, raising the package to a record $150 billion with easier terms, after a smaller rescue plan failed to stabilise the ailing insurance giant.

China's spending package, which aims to boost domestic demand and help the world's forth largest economy ride out the credit crisis, helped push the dollar lower. [nN10468053]

Saudi Arabia told refiners in Asia it would cut December supplies by 5 percent, signalling its adherence to an OPEC plan to cut output.

OPEC members last month agreed to lower the group's output ceiling by 1.5 million barrels per day (bpd), roughly 5 percent, after slumping demand in the United States and other top consumers sent crude prices tumbling from record highs over $147 a barrel in July.