By Christian Schmollinger Dec. 11 (Bloomberg) -- Crude oil rose for a second day on optimism fuel demand will be revived after the U.S. House of Representatives approved a $14 billion loan to rescue automakers. Oil extended yesterday’s 3 percent gain as the measure may avert the loss of millions of U.S. jobs. Crude has fallen 20 percent in the past two weeks as global economic growth slumps. “Passing the package removes some of the concern of investors about putting money into the market,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Tokyo. “It’s one factor to get the economy going but still, a lot of consumption has declined.” Crude oil for January delivery rose as much as 72 cents, or 1.7 percent, to $44.24 a barrel, in electronic trading on the New York Mercantile Exchange and traded at $43.96 at 1:44 p.m. Singapore time. Futures, which have dropped 55 percent this year, are heading for the biggest annual decline since trading began in 1983 as global economies falter. The House approved the legislation that calls for the appointment of a so-called car czar to loan money to the automakers while requiring them to submit long-term plans on how they will return to financial viability. The vote sends the measure to the Senate, where opposition is growing. The bailout is a lifeline to General Motors Corp. and Chrysler LLC, which said they would run out of cash by early next year. The Bush administration and Democratic leaders in Congress backed the measure, which they said would force the automakers to restructure to achieve financial viability or repay the loans. Fighting Recession Policy makers worldwide are reducing borrowing costs to spur consumer spending and fight recession. South Korea cut its benchmark interest rate to a record low of 3 percent today while Taiwan may reduce interest rates to a three-year low. The bailout “does go to the broader economic outlook of the U.S. and that’s an important influence on the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Even with the package there is still the broader issue of weakness in demand and the deeper economic problems in the U.S.” Oil rose yesterday after Russia signaled it may coordinate an output cut with OPEC next week to end the five-month, $100 slump in prices. OPEC Output Energy Minister Sergei Shmatko said Russia will announce proposals for reducing production by Dec. 17, when OPEC meets, Interfax reported. OPEC, source of more than 40 percent of the world’s oil, may next week trim output by as much as 2.5 million barrels a day, billionaire hedge-fund manager Boone Pickens said Dec. 9. Shmatko said he had spoken on the phone to the president of the Organization of Petroleum Exporting Countries and that the group is preparing “significant” supply reductions, Interfax said. Russia is the world’s largest exporter after Saudi Arabia. Norway, the next biggest non-OPEC exporter, has no plans to lower production, the petroleum ministry said. “If they were to cut, they would have some pricing power in the market,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. “It is possible Russia will cut. But bear in mind, if they don’t cut, they have a lot to benefit from an OPEC cut.” OPEC should make a “substantial” output cut when it meets on Dec. 17 in Algeria, Shokri Ghanem, Libya’s top oil official, said on Dec. 8. Oil has tumbled 29 percent since the group announced a 1.5 million barrel-a-day supply reduction on Oct. 24. U.S. Inventories “If OPEC cuts 2.5 million barrels a day, that’s enough volume to stop the decline in the crude oil markets,” said Newedge’s Hasegawa. “But at the same time everyone understands that a high price makes the economy start to slow again. This balance is very important.” The U.S. government released a report yesterday that showed inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, climbed last week as refineries increased operating rates and demand dropped. Gasoline stockpiles rose 3.7 million barrels to 202.7 million barrels in the week ended Dec. 5, the Energy Department said yesterday in the weekly report. Distillate inventories climbed 5.6 million barrels to 130.6 million. Gasoline supplies were forecast to fall 400,000 barrels and distillate supplies by 1.5 million barrels, according to a Bloomberg News survey. Inventories of crude oil rose 392,000 barrels to 320.8 million, the department said. Supplies were forecast to increase by 1.3 million barrels, according to the median of 14 responses in the Bloomberg News survey. Refineries operated at 87.4 percent of capacity, up 3.1 percentage points from the week before. Brent crude oil for January settlement rose as much as 20 cents, or 0.5 percent, to $42.60 a barrel on London’s ICE Futures Europe exchange. The contract increased 87 cents, or 2.1 percent, to settle at $42.40 a barrel yesterday. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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