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Oil Rises on U.S. Economic Growth, Hopes for Europe Rescue Plan

Oil climbed in New York, paring its biggest quarterly drop since 2008, after the U.S. economy grew faster than estimated and on speculation Europe’s bail-out fund will support economic growth.

Futures advanced as much as 1.9 percent, extending gains after the Commerce Department said the world’s largest economy expanded by 1.3 percent in the second quarter, compared with a previous estimate of 1.1 percent. Germany’s lower house of parliament today agreed to the extension of the European Financial Stability Facility endorsed by Chancellor Angela Merkel. The country’s upper house will vote on it tomorrow. Still, a Bloomberg poll indicates investors see the euro area heading toward recession.

“Obviously the extension of the European Financial Stability Facility would have an impact on growth in Europe, and then other countries, and that’s why the market is reacting so strongly,” Christophe Barret, a London-based analyst at Credit Agricole CIB who correctly predicted last month that prices would drop and forecasts Brent will fall to $90 a barrel by year-end. “Fundamentals remain very weak; economic growth is worse than expected.”

Crude for November delivery gained as much as $1.52 to $82.73 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.35 at 12:33 p.m. London time. The contract yesterday slid 3.8 percent to $81.21. Futures are down 7.3 percent this month and 9.9 percent this year. Prices have dropped 14 percent since the end of June, the biggest quarterly loss since the last three months of 2008.

Technical Support

Brent oil for November settlement was at $104.91 a barrel, up $1.10, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.56 to New York crude, compared with a record of $26.87 on Sept. 6.

Oil rebounded in New York after falling as low as $79.64. Futures have technical support along the lower Bollinger Band at about $79.21 a barrel today, according to data compiled by Bloomberg. Buy orders tend to be clustered near chart-support levels. Five-day stochastic oscillators have fallen below 30, signaling that prices have dropped too quickly.

Morgan Stanley said Brent will average $100 next year, down from a previous projection of $130, because of increasing supply and a weaker demand outlook.

Production capacity in the Organization of Petroleum Exporting Countries will climb almost 800,000 barrels a day in 2012, led by the return of Libyan fields, Morgan Stanley analysts led by New York-based Hussein Allidina said in a report yesterday.

Shell Refinery Fire

Royal Dutch Shell Plc continued to fight a blaze that shut a gasoline and diesel unit at its oil refinery in Singapore, the largest operated by the company.

Shell’s refining complex on an island off Singapore was on fire for a second day as firefighters battled to contain the worst blaze at the site in 23 years. The fire at Pulau Bukom is still contained after a “surge” today at about noon local time, the company said.

The Singapore Civil Defence Force is trying to prevent the blaze from spreading to storage tanks, according to the fire department. Shell’s crude-distillate units at Pulau Bukom have a total capacity of 500,000 barrels a day. The site also houses an 800,000 metric ton-a-year ethylene plant and a 155,000 ton-a-year butadiene-extraction unit.

About three-quarters of those questioned in a Bloomberg survey this week said the euro-area economy will fall into recession during the next 12 months and 53 percent said turmoil will worsen in a banking sector laden with government bonds, according to the quarterly Global Poll of 1,031 investors, analysts and traders who are Bloomberg subscribers.

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