Oil Rises Most in Eight Weeks on China Speculation, Spain

Oil advanced the most in eight weeks on the possibility China’s government will bolster stimulus efforts and as Spain approved a 2013 austerity budget.

Futures gained 2.1 percent and equities rose worldwide on signals China will announce measures to boost the economy. Spain’s Prime Minister Mariano Rajoy has promised to cut the deficit by at least 18 billion euros ($23.2 billion) next year. Oil also increased as gasoline reached a one-month high.

“The crude market is bouncing with equities on speculation China will take action to improve the economy and on the Spanish budget announcement, which is being seen as a positive development,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.

Crude oil for November delivery rose $1.87 to settle at $91.85 a barrel on the New York Mercantile Exchange, the biggest gain since Aug. 3. The contract fell to $89.98 yesterday, the lowest settlement since Aug. 2. Prices are down 4.8 percent this month and up 8.1 percent this quarter.

Brent oil for November settlement increased $1.97, or 1.8 percent, to end the session at $112.01 a barrel on the London- based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate crude traded in New York widened to $20.16.

Chinese stocks surged after Shanghai Securities News said the government may announce market-boosting measures. The Shanghai Composite index (MXWD) rose 2.6 percent. The MSCI All-Country World Index climbed 1 percent as of 3:27 p.m. in New York, rebounding from its biggest drop since July. The Standard & Poor’s 500 Index (SPX) advanced 1 percent to halt a five-day slump.

Reducing Deficits

In Spain, Rajoy’s cabinet approved a new tax on lottery winnings and a cut in ministries’ spending to shrink the euro area’s third-biggest budget deficit. The 2013 target is 4.5 percent of gross domestic product compared with a 6.3 percent goal for this year.

Europe’s debt crisis has reduced economic growth and the continent’s energy consumption for three years. The crisis that began in Greece has spread to Ireland, Portugal, Italy, Spain and Cyprus.

“Any diminution in euro-zone debt worries is good for the market,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “We are a long way from an end to the crisis.”

Gasoline rose on concern that refinery shutdowns in the Atlantic Basin will further reduce supplies on the U.S. East Coast. Europe’s largest refinery, Royal Dutch Shell Plc (RDSA)’s 400,000-barrel-a-day Pernis plant in the Netherlands, is conducting maintenance until early November. East Coast supplies are at the lowest level in almost four years, the Energy Department said yesterday.

Gasoline Support

“We’re getting support from motor gasoline,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “The fundamental value of crude oil is based on the supply and demand for products such as gasoline.”

Gasoline for October delivery rose 6.32 cents, or 2.1 percent, to $3.1443 a gallon in New York, the highest settlement since Aug. 27.

The U.S. grew less than previously forecast in the second quarter. The economy expanded at a 1.3 percent pace from April through June after growing at a 2 percent rate in the first quarter, the Commerce Department said. The revision compared with a prior estimate of 1.7 percent and the 1.7 percent median forecast in a Bloomberg survey.

The Chinese and Spanish news was “enough to get us to shrug off the downward revision in GDP,” Yawger said.

Durable Goods

Another report showed orders placed with American factories for durable goods in August slumped 13 percent, the most since January 2009. Excluding volatile demand for items such as airplanes and automobiles, the decline was 1.6 percent. Applications for jobless benefits decreased 26,000 to 359,000 in the week ended Sept. 22, the lowest level since July, Labor Department figures showed today.

The U.S. and China are the world’s biggest oil-consuming countries, accounting for a combined 32 percent of world demand, according to BP Plc (BP/)’s Statistical Review of World Energy. The 27 members of the European Union were responsible for 16 percent of global oil use in 2011, BP said.

Prices dropped yesterday after the Energy Department report showed U.S. crude production climbed to the highest level since January 1997 last week as fuel demand dropped. Crude output rose by 3.7 percent to 6.509 milli1on barrels a day last week. Total fuel consumption fell 1.1 percent to 18.4 million barrels a day in the four weeks ended Sept. 21, the lowest level since April.

‘Terrible’ Demand

“The demand side of yesterday’s report was terrible,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “It looks like the market will resume moving lower next week and test the $87 area.”

Oil touched a low of $86.92 on Aug. 2.

Electronic trading volume on the Nymex was 387,542 contracts as of 3:28 p.m. Volume totaled 548,727 contracts yesterday, 3.1 percent above the three-month average. Open interest was 1.56 million.

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

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