Crude Oil Gains as Chinese Economic Growth Counters Europe Debt Concern

Crude rose to the highest level in almost three weeks on greater-than-forecast growth in U.S. private employment and Chinese manufacturing and on signals the European Central Bank will act to prevent the spread of the region’s debt crisis.

Prices surged 3.1 percent as companies in the U.S. boosted payrolls the most since November 2007, according to figures from ADP Employer Services. Chinese manufacturing expanded at the fastest rate in seven months. Futures reached the day’s high after Goldman, Sachs & Co. said oil will average $110 a barrel in 2012, up from a forecast $100 a barrel next year.

“As the global economy goes, so goes oil,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “The economic numbers in China and elsewhere today have been very strong and point to accelerating growth.”

Crude oil for January delivery increased $2.64 to $86.75 a barrel on the New York Mercantile Exchange, the highest settlement price since Nov. 11. The contract is up 11 percent from a year ago.

Brent crude oil for January settlement rose $2.95, or 3.4 percent, to end the session at $88.87 a barrel on the London- based ICE Futures Europe exchange. It was the biggest gain since May 27.

Goldman Projections

Goldman Sachs increased its forecast for U.S. gross domestic product growth next year to 2.7 percent from 2 percent. The U.S. economy will expand 3.6 percent in 2012, according to a report sent to Goldman clients today. The global economy will expand 4.6 percent next year and 4.8 percent in 2012, the bank said.

“Goldman has been banging the bull drum all year,” said Phil Flynn, a Chicago-based analyst and trader with investment adviser PFGBest.

U.S. payrolls rose by 93,000 in November, according to figures from ADP Employer Services. The Institute for Supply Management reported today that manufacturing in the U.S. expanded for a 16th straight month in November.

“Today’s ADP report shows that private sector payrolls grew last month,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “That means more people will be driving and gasoline consumption will increase.”

China’s Purchasing Managers’ Index increased to 55.2 from 54.7 in October, the country’s logistics federation said today. That was higher than the 54.8 median estimate of 14 economists surveyed by Bloomberg News.

European Output

Europe’s manufacturing industries expanded at the fastest pace in four months in November, led by Germany, the region’s largest economy. A gauge of manufacturing in the 16-nation euro area rose to 55.3 from 54.6 in the previous month, London-based Markit Economics said today.

“Today’s economic headlines point to stronger fuel demand in 2011 and higher prices,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “OPEC is not overwhelming the market and global stockpiles should fall.”

The Organization of Petroleum Exporting Countries’ crude- oil output slipped 80,000 barrels, or 0.3 percent, to an average 29.05 million barrels a day in November, according to a Bloomberg News survey yesterday.

European Central Bank policy makers may delay their exit from emergency liquidity measures at tomorrow’s meeting of the Governing Council in Frankfurt. ECB President Jean-Claude Trichet said investors are underestimating the bank’s determination to shore up the shared currency.

European Rescue

Oil, equities and the euro extended gains after Reuters reported that an unidentified official said the U.S. may support enlarging a European financial rescue program by adding cash from the International Monetary Fund. The U.S. is not discussing extra IMF money for Europe, a U.S. official told Bloomberg News.

The Standard & Poor’s 500 Index advanced 2.2 percent to 1,206.06 at 3:26 p.m. The Dow Jones Industrial Average increased 2.3 percent to 11,260.96. The euro rose 1.2 percent to $1.3133 from $1.2983 yesterday, when it touched $1.2969, the lowest level since Sept. 15.

U.S. crude oil supplies climbed 1.07 million barrels to 359.7 million in the week ended Nov. 26, an Energy Department report showed today. Inventories were forecast to decrease by 1.15 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.

“The weekly inventory reports have become less relevant as the economy moves to the fore,” Julian said. “We’re reacting to economic news.”

Oil volume on the Nymex was 548,066 contracts as of 3:26 p.m. in electronic trading in New York. Volume totaled 548,245 contracts yesterday, 21 percent below the average of the past three months. Open interest was 1.34 million contracts.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net