Oil rose from a two-week low as more investors signed on to a Greek debt swap, reducing concern that the country will default and bolstering optimism that the European economy will rebound.

Futures climbed 1.4 percent after investors with holdings amounting to 58 percent of the Greek bonds eligible for the nation’s debt swap agreed to participate. An Energy Department report showed that U.S. crude supplies increased last week while stockpiles of gasoline, diesel and heating oil fell.

“Markets are creeping higher because it looks like Greece is at the threshold of a debt deal,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “A Greek default would have been an incredibly disruptive event. We’re now seeing a rebound in sentiment and hopes that the economy will grow going forward.”

Crude oil for April delivery rose $1.46 to settle at $106.16 a barrel on the New York Mercantile Exchange. Prices are up 7.4 percent this year.

Brent oil for April settlement increased $2.14, or 1.8 percent, to end the session at $124.12 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas intermediate oil widened to $17.96, the most since Feb. 10. The spread reached a record $27.88 on Oct. 14.

The European sovereign debt crisis that began in Greece and then moved to Ireland, Portugal, Italy and Spain has reduced economic growth.

The Standard & Poor’s 500 Index was up 0.8 percent at 3:38 p.m. in New York. The euro gained 0.3 percent against the dollar. A stronger common currency and weaker dollar bolster the appeal of raw materials as an investment alternative.

Employment Growth

Companies in the U.S. added 216,000 workers to their payrolls in February, according to data today from Roseland, New Jersey-based ADP Employer Services. The median projection of economists surveyed by Bloomberg News called for an increase of 215,000. ADP reported a revised 173,000 increase in January.

U.S. employers are poised to boost jobs as confidence in the economy climbed to the highest level in a year, a quarterly survey of chief financial officers showed today. A gauge of executives’ optimism in the world’s largest economy rose to 59.2 from January through March from 53.3 the prior period, according to a report issued today by Duke University/CFO Magazine.

The U.S. was the world’s biggest oil-consuming country in 2010, responsible for 21 percent of global oil use, according to BP Plc’s Statistical Review of World Energy, released on June 8. The European Union’s 27 members accounted for 16 percent of world demand in 2010, BP figures show.

“The global economy is still at risk,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “The market is sensitive to any external catalyst at this point.”

U.S. Stockpiles

Crude supplies climbed 832,000 barrels to 345.7 million barrels last week, the highest level since September, the Energy Department report showed. Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded futures, climbed 2.37 million barrels to 36.2 million, the biggest gain since December 2009.

Gasoline inventories fell 396,000 barrels to 229.5 million last week, the Energy Department said. Supplies of distillate fuel, a category that includes heating oil and diesel, decreased 1.94 million barrels to 139.5 million.

“The statistics today were bearish on the face of it, especially the big build at Cushing,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Supplies didn’t rise as much as expected nationwide though, and demand for crude and fuel remains poor.”

Total fuel demand fell an average 78,000 barrels a day to 18.2 million last week, the report showed. Consumption was down 7.6 percent from the same week a year earlier.

Iranian Tension

Oil has climbed this year on concern U.S. and European sanctions aimed at stopping Iran’s nuclear program will lead to military conflict. The European Union yesterday offered to negotiate with Iran on behalf of China, France, Germany, Russia, the U.K. and the U.S., after President Barack Obama called for more time to let diplomacy and sanctions solve the standoff.

Sanctions may be cutting Iranian oil exports as vessels cancel trips to the country. Shipments have declined by 300,000 to 400,000 barrels a day because of the restrictions, Amrita Sen, an analyst at Barclays Capital in London, said today by e-mail. Half of the tankers booked to load at the country’s largest terminal last month didn’t complete the voyages, according to brokers, company officials and ship-tracking data.

“The market has been supported by a fear premium,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “Once the situation calms down and the fear is alleviated, prices will drop below $100.”

Electronic trading volume on the Nymex was 719,490 contracts as of 3:39 p.m. in New York. Volume totaled 737,533 contracts yesterday, 19 percent above the three-month average. Open interest was 1.58 million, the highest level since June 14.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE