Crude Oil Climbs After Reports Show Gains in U.S., Chinese Manufacturing

Crude oil surged the most in a month after manufacturing in the U.S. and China, the world’s biggest energy-consuming countries, accelerated in August at a faster pace than forecast.

Oil climbed 2.8 percent and equities rebounded from the biggest August slump in nine years after the Tempe, Arizona- based Institute for Supply Management’s factory index rose to 56.3 from 55.5 in July. Futures gained even as U.S. crude oil supplies increased 3.43 million barrels to 361.7 million last week, an Energy Department report showed today.

“The ISM just blew everyone away,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Energy traders look to the manufacturing sector as a barometer of the economy and demand.”

Crude oil for October delivery rose $1.99 to settle at $73.91 a barrel on the New York Mercantile Exchange, the biggest gain since Aug. 2. Futures are up 8.6 percent from a year ago.

Brent crude for October settlement increased $1.71, or 2.3 percent, to end the session at $76.35 a barrel on the London- based ICE Futures Europe Exchange.

The Standard & Poor’s 500 Index gained 2.8 percent to 1,078.59 at 3:15 p.m. in New York, and the Dow Jones Industrial Average climbed 237.57 points, or 2.4 percent, to 10,252.29.

The dollar slipped 0.9 percent to $1.2799 against the euro, the most since Aug. 2. The U.S. currency’s decline bolsters the appeal of commodities to investors.

‘Fundamentals Don’t Matter’

“Oil moves along with equities, the fundamentals don’t matter,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Any shred of positive or negative economic news will move the oil market by a couple percentage points.”

Economists forecast the ISM factory index would decline to 52.8, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from 49.9 to 56.

Manufacturing in China grew at a faster pace in August after the weakest performance since early 2009 in July, signaling that the economy’s slowdown is stabilizing.

The purchasing managers’ index rose to 51.7 from 51.2, exceeding forecasts, a government-backed report showed. Seasonal factors might have had an effect because the index typically gains as factories restart following July maintenance, Mizuho Securities Asia Ltd. said. A separate PMI released by HSBC Holdings Plc and Markit Economics gained to 51.9 from 49.4.

The August reading for the government index was more than the median 51.5 forecast in the Bloomberg survey of 17 economists. Fifty is the dividing line between expansion and contraction.

Chinese Car Sales

China’s passenger-car sales rose 59 percent in August from a year earlier, more than three times July’s pace, the China Automotive Technology & Research Center said today.

“The Chinese PMI impressed all of the markets,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “This was just what the crude oil market needed to kick it to the upside.”

U.S. crude oil supplies were projected to rise 1.2 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.

Crude oil inventories at Cushing, Oklahoma, the delivery point for New York futures, dropped 503,000 barrels to 35.8 million. The decline left stockpiles at the lowest level since the week ended April 23.

Fuel Supplies

Gasoline inventories slipped 212,000 barrels to 225.4 million. Stockpiles of distillate fuel, a category that includes heating oil and diesel, fell 739,000 barrels to 175.2 million last week, the first decline in 14 weeks.

Gasoline for October delivery rose 3.17 cents, or 1.7 percent, to settle at $1.8891 a gallon in New York. Heating oil for October climbed 4.94 cents, or 2.5 percent, to end the session at $2.0411 a gallon, the biggest gain since Aug. 2.

Overall petroleum stockpiles, a combination of oil and fuel supplies, climbed 4.04 million barrels, or 0.4 percent, to 1.14 billion, the highest level since at least 1990. Total U.S. fuel demand rose 0.4 percent to 19.6 million barrels a day in the past four weeks, according to the department.

Refineries operated at 87 percent of capacity, down 0.7 percentage point from the prior week. It was the lowest level since April.

Oil volume on the Nymex was 747,132 contracts as of 3:08 p.m. in electronic trading in New York. Volume totaled 915,387 contracts yesterday, 47 percent above the average of the past three months. Open interest was 1.31 million contracts, the highest since June 16.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net.

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