The gains extend oil's climb from a low near $90 last week after the United States unveiled a sweeping rescue plan for its battered financial sector, improving the outlook for energy demand in the world's biggest consumer nation.
U.S. crude for October delivery, which expires Monday, settled up $16.37, or 15.7 percent, at $120.92 per barrel. The contract for delivery in November, which was much more actively traded, was up only $6.62 at $109.37. London Brent crude settled up $6.43 at $106.04.
The U.S. dollar fell 2 percent against the euro on Monday, weighed down by worries about the fiscal impact of the U.S. government's $700 billion bailout plan aimed at addressing the global credit crisis. A weaker dollar boosts the purchasing power of commodity buyers using other currencies.
The U.S. government measures to rescue the financial system have also restored confidence in the energy markets that U.S. fuel demand may not decline as quickly as initially feared.
Oil prices had tumbled from record highs above $147 a barrel in mid-July, weighed down by growing evidence that high energy costs and economic woes were undercutting global fuel demand.
The slow recovery of the U.S. oil sector after Hurricane Ike also supported prices Monday, after causing the biggest disruption to the nation's energy supplies since 2005. Nearly 80 percent of oil production in the U.S. Gulf of Mexico, home to a quarter of all U.S. oil output, remained shut along with seven refineries.
Oil prices were also supported by news China increased crude imports 11.54 percent in August from a year earlier, recovering from a steep July fall, the General Administration of Customs said on Friday, confirming earlier data.
Gold rose above $900 an ounce, extending a rally after its biggest weekly gain in almost nine years, as investors shifted assets into precious metals as a haven from market turmoil. Silver gained more than 7 percent.
Gold futures for December delivery rose $44.30, or 5.1 percent, to $909 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most- active contract since Aug. 1. The metal gained 13 percent last week, the most since October 1999.
Silver futures for December delivery rose 97.5 cents, or 7.8 percent, to $13.45 an ounce on the Comex. The metal still has fallen 9.9 percent this year.