Toronto stocks rallied Wednesday, as oil prices lifted and the energy sector spiked.

The S&P/TSX composite index finished up 107.21, or 0.99%, to 10.932.41.

Volume on the senior exchange was 253 million shares.

Seven of the 10 TSX main sub-groups were up, with the energy group lifting 2.5%.

Light, sweet crude for October delivery closed up US$1.98 to settle at $65.09 a barrel, after the U.S. Energy Department reported that hurricane Katrina caused domestic crude stocks to fall by 6.6 million barrels last week.

EnCana rose $1.97, or 3.38%, to $60.22 after its Brazilian subsidiary announced an oil discovery off the coast of the South American country.

OPTI Canada Inc. announced a $3.5-billion oil sands joint venture with Nexen Inc. OPTI’s shares jumped $3.09, or 7.99%, to $41.75, while Nexen gained $2.35, or 4.31%, to $56.90.

The gold sector climbed 3.89% after gold futures closed up $3.70 at US$453.70 an ounce.

The consumer discretionary sector gained 0.78%.

Sears Canada said it will distribute $2 billion from the sale of its credit and financial services division through an extraordinary dividend and will look to cut costs. Sears shares gained $3.65, or 11.85%, to $4.45.

Dofasco’s shares dropped 25 cents, or 0.53%, to $ 46.80 after the company said it expects its third-quarter earnings will be lower than analysts’ forecasts.

In economic news, Statistics Canada reported widespread declines in the manufacturing sector in July that pulled down shipments by 1.4% to $50.1 billion and new orders by 0.4% to $51.1 billion. Unfulfilled orders, however, lifted by 2.4% to $41.6 billion, the highest level since late 2002.

The Canadian dollar closed up 0.04 of a U.S. cent at 84.69 U.S. cents.

The junior S&P/TSX venture exchange finished up 23 points, or 1.16%, to 2,010.78.

In New York, markets were jittery on higher oil prices and a news report suggesting both Delta Air Lines and Northwest Airlines were likely to file for bankruptcy in the coming days.

The Dow Jones industrial average fell 52.54 points at 10,544, the S&P 500 closed 4.04 points lower at 1,227.16 and the Nasdaq composite dropped 22.42 points at 2,149.33.