Oil Rises $3.17 on a New Round of Mideast Rumors : Energy: U.S. plans to send more troops didn’t help, nor did a report of French pessimism.

The rumor mill was hard at work at the New York Mercantile Exchange again Thursday, sending crude oil prices up more than $3 on increasing fears of war in the Persian Gulf.

Pessimistic comments by world leaders--and a continuing U.S. military buildup--fueled the market’s erratic behavior. The barrel price of benchmark West Texas Intermediate crude for December delivery jumped $3.17, to $34.25.

It was the third biggest one-day jump in crude prices since Iraqi forces invaded Kuwait on Aug. 2, topped only by increases of $3.56 per barrel on Aug. 6 and $3.37 per barrel on Oct. 3.

“In this environment, it defies all understanding,” said Thomas G. Burns, manager for economics at Chevron Corp. in San Francisco. “Obviously, gas and oil prices are moving in response to rumors, emotions, fundamentals, politics and on occasion even to dreams. It’s virtually impossible to make clear-cut sense.”

The $3.17 jump is “significant,” but hard to explain, said Douglas G. Elmets, a spokesman for Atlantic Richfield Co. in Los Angeles.

“The gyrations of the marketplace would make the price go up or down on the smallest of rumor,” Elmets said. “I think it is in keeping with the uncertainty in the futures market, which is indicative of the concern over the potential for a military conflict in the Middle East.”

Home heating oil for November delivery jumped 6.55 cents to 91.67 cents a gallon, while November unleaded gasoline was 8.21 cents higher at 93.60 cents a gallon.

Analysts scrambling to find tangible news on which to pin the higher prices pointed to a statement by Defense Secretary Dick Cheney. Cheney said Thursday that the United States will continue its military buildup in the Persian Gulf, perhaps adding as many as 100,000 troops in another wave of deployment.

In addition, news reports said French President Francois Mitterand expects war to break out in the Persian Gulf soon, because of the continuing intransigence of Iraqi President Saddam Hussein.

The International Herald Tribune reported the comments, quoting an unnamed source. A spokesman for Mitterand denied later in the day that he had made such comments.

Traders “base their futures trading on what is discussed in the international community,” Elmets said. “Francois Mitterand indicated that there is increased chance for war. . . . That is frankly a more substantial rumor than they generally go on. They’ll move the price up or down on rumors from sources that are less reliable than that.”

And they did. After oil rose about $2 early Thursday on such comments, crude prices were propelled even higher by wild rumors that swept the exchange.

Traders first responded to a rumor that President Bush had given the Iraqis two weeks to vacate Kuwait. A late-day rally was sparked by another rumor that U.S. troops had moved into Kuwait.

Norman E. Mains, director of research at Bateman Eichler, Hill Richards, said the steep jump could also be a correction of Monday’s record one-day free-fall in crude prices. In that instance, benchmark crude for November delivery plunged more than $5 a barrel on a report that Hussein dreamed the prophet Mohammed urged him to withdraw from Kuwait.

When the hopes for peace did not materialize, Mains said, the price of oil moved back up.