Oil rose more than $3 to $108 a barrel on Monday, continuing a rally sparked by the United States' rescue plan for its financial sector.

Sweeping government measures to rescue the financial system and restore confidence in shaky markets spurred gains across markets on Friday, when oil rose almost 7 percent to cap its biggest three-day rally in a decade.

U.S. crude for October delivery, which expires Monday, rose $3.46 to $108.01 a barrel by 1346 GMT.

London Brent crude traded up $3.53 to $103.13.

"The key driver continues to be the U.S. rescue package which has changed the sentiment in the oil market," said Bank of Ireland analyst Paul Harris.

"Oil had fallen back below $100 a barrel last week on demand worries, but the package has gone some way to easing those concerns. However, I don't think there is enough clarity yet to see prices go significantly higher."

Oil has tumbled from record highs over $147 a barrel in mid-July, weighed down by growing evidence that high energy costs and economic woes are undercutting global fuel demand.

Further pressure came last week as financial sector turmoil sent investors out of commodities and into safer havens, sending oil to a seven-month low of $90.51 a barrel.

The slow recovery of the U.S. oil sector after Hurricane Ike caused the biggest disrtuption to the nation's energy supplies since 2006 has supported prices.

Nearly 90 percent of oil production in the U.S. Gulf of Mexico, home to a quarter of all U.S. oil output, remains shut along with seven refineries.

Oil prices were also supported on Monday by news China increased crude imports 11.54 percent in August compared with a year earlier, recovering from a steep July fall, the General Administration of Customs said on Friday, confirming earlier data.

"The Chinese import news is a sign of recovery, and a good indication that oil prices could get back up again." said Christopher Bellew of Bache Financial

Industry sources also said on Monday that top oil exporter Saudi Arabia has trimmed oil supplies to international majors and U.S. refiners since the start of September.

However, oil's rise on Monday was capped by news that Nigeria's main militant group had begun a unilateral ceasefire on Sunday after a week of clashes with the military and attacks on oil installations which cut output in Africa's top producer.