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Oil Gains in New York; Set for Biggest Quarterly Drop Since 2008

Oil rose in New York, paring the steepest quarterly drop since 2008, as investors speculated U.S. fuel demand will increase on signs the economy of the world’s biggest crude user is expanding faster than estimated.

Futures climbed for a second day after reports showed U.S. gross domestic product last quarter and jobless claims last week beat forecasts. West Texas Intermediate’s discount to European Brent oil narrowed for a sixth day, the longest streak since March 2010.

“The data out of the U.S. is supportive,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney. “Volatility continues for the oil market. I don’t expect it to push through $85 in a hurry.”

Crude for November delivery gained as much as $1.09, or 1.3 percent, to $83.23 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.94 at 3:55 p.m. Sydney time. Oil is down 7 percent this month. It has fallen 13 percent this quarter, the biggest decline since the three months ended Dec. 31, 2008.

Brent oil for November settlement rose 57 cents, or 0.6 percent, to $104.52 a barrel on the London-based ICE Futures Europe exchange. Prices are down 7 percent this quarter. The European benchmark contract was at a premium of $21.58 to West Texas Intermediate futures.

Libyan Output

Brent climbed to a record of $26.87 more than WTI on Sept. 6 as fighting in Libya reduced the availability of light, sweet crude, or oil with low density and sulfur content. Libya is now producing 300,000 barrels a day of oil, said Ali Tarhouni, the official in charge of the North African nation’s finance and oil ministries, speaking to reporters in Tripoli yesterday.

The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

The U.S. economy grew at a 1.3 percent pace in the second quarter, faster than the 1 percent estimated by the Commerce Department last month and beating the median forecast of 1.2 percent in a Bloomberg survey. Initial jobless claims last week fell to the lowest since April and pending homes sales in August declined less than expected.

European Economy

Oil may fall next week on concern that Europe’s economy is showing signs of a slowdown as governments struggle to contain their fiscal crisis and avert a Greek default, according to a Bloomberg News survey. Thirteen of 28 analysts, or 46 percent, forecast oil will decline through Oct. 7, while eight respondents, or 29 percent, predicted prices will increase.

Greek Prime Minister George Papandreou will meet French President Nicolas Sarkozy today in Paris after seeing European Union President Herman Van Rompuy in Warsaw. European leaders next week will discuss a permanent rescue fund after German lawmakers approved an expansion of the temporary European Financial Stability Facility.

The U.S. and the European Union accounted for about 38 percent of global oil demand last year, according to BP Plc’s annual Statistical Review of World Energy.

A gauge of manufacturing in China, which consumes about a tenth of the world’s oil, shrank for a third month, the longest contraction since 2009. The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week. China is the world’s second largest crude consumer.

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