July 30 (Bloomberg) -- Crude oil rose more than $3 a barrel and gasoline surged the most in four months after better-than- expected corporate earnings and as jobless claims held below June levels.

Oil gained 5.7 percent as stocks advanced on increased optimism that the economic decline will ease. The number of people collecting unemployment insurance decreased for a third week, according to the Labor Department. A U.S. report yesterday showed that crude supplies unexpectedly climbed as demand lagged behind year-earlier levels.

“More people think the economy has bottomed and are buying equities and commodities as a result,” said Bill O’Grady, the chief market strategist for Confluence Investment Management in St. Louis. “The fundamentals of the oil market are still poor, but investors are looking to the future.”

Crude oil for September delivery rose $3.59 to settle at $66.94 a barrel on the New York Mercantile Exchange, the biggest gain since April 9. Prices are up 50 percent this year.

Gasoline for August delivery increased 13.61 cents, or 7.3 percent, to end the session at $1.9911 a gallon in New York. It was the biggest one-day gain since March 12.

Motorola Inc., the biggest U.S. mobile-phone maker, posted a narrower second-quarter loss than projected. Newell Rubbermaid Inc., the maker of Calphalon cookware and Paper Mate pens, posted a second-quarter profit and a full-year earnings forecast that exceeded analysts’ estimates.

Two of the world’s largest energy companies, Exxon Mobil Corp. and Royal Dutch Shell Plc, posted declines amid slumping fuel demand.

Unemployment Applications

U.S. unemployment-benefit applications rose by 25,000 to 584,000 in the week ended July 25. More than 600,000 claims were filed every week last month. The level of continuing claims fell by 54,000 to 6.197 million in the week ended July 18, the lowest level since April, according to the Labor Department.

Yesterday, futures dropped $3.88, or 5.8 percent, to $63.35, the biggest one-day decline since April, after the Energy Department reported that crude-oil inventories gained 5.15 million barrels to 347.8 million in the week ended July 24.

“Yesterday, we had a big selloff based on supply and demand,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “It looks like we are back to trading on extraneous external factors like the equity market and dollar instead of the fundamentals.”

U.S. stockpiles of distillate fuel, a category that includes diesel and heating oil, rose 2.1 million barrels to 162.6 million, the highest since January 1985, the department said yesterday in its weekly report.

Heating oil for August delivery added 9.72 cents, or 5.8 percent, to settle at $1.7685 a gallon. It was the biggest increase since June 1.

Goldman Forecast

Goldman Sachs Group Inc. maintained its forecast that West Texas Intermediate crude oil, the benchmark grade for New York futures, will reach $85 a barrel by year-end as the recent weakness in fundamentals will be temporary.

“Concerns over economic growth and weak oil statistics led a commodity selloff yesterday,” Goldman analysts, led by London-based Jeffrey Currie, said in a report today. “However, we believe most of these drivers are less negative than they first appear.”

Brent crude oil for September settlement on London’s ICE Futures Europe exchange increased $3.58, or 5.4 percent, to $70.11 a barrel.

Demand Toll

Exxon Mobil and Royal Dutch Shell posted their largest drops in second-quarter profit in more than a decade after poor fuel demand spurred a record slump in oil prices. The declines were the third straight for both companies.

Exxon Mobil’s oil and gas output fell 3.3 percent to the equivalent of 3.68 million barrels a day, the lowest second- quarter production since Exxon Corp.’s 1999 acquisition of Mobil Corp.

Shell’s output fell 5.3 percent to the equivalent of 2.96 million barrels of oil a day, partly on production disruptions in Nigeria.

Exxon Mobil and Shell produce one of every seven gallons of refined fuels in the world.

U.S. refinery use last week fell 1.3 percentage points to 84.6 percent, its second consecutive drop and 2.6 points below the same year-ago period, according to the Energy Department.

“It’s just more the whole feeling that we’re coming out of this economic slowdown,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “The last two days of bearish data just sort of got swept under the rug.”

Crude oil volume in electronic trading on the Nymex was 529,883 contracts as of 3:36 p.m. in New York. Volume totaled 593,549 contracts yesterday, 16 percent higher than the average over the past three months. Open interest was 1.17 million contracts yesterday.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.; Paul Burkhardt in New York at pburkhardt@bloomberg.net;

Last Updated: July 30, 2009 16:24 EDT