By Grant Smith and Ann Koh Aug. 26 (Bloomberg) -- Oil rose for a second day in New York, buoyed by advancing equity markets and speculation that crude’s 7 percent drop this month has been excessive relative to the economic outlook. Oil climbed as much 1.1 percent as European stocks rebounded from a five-week low and the MSCI Asia Pacific Index snapped two days of losses. The investment appeal of commodities was boosted as the dollar weakened against all but three of its 16 most-traded peers. U.S. crude inventories last week surged more than 10 times the amount forecast by analysts, Energy Department data showed yesterday. “While yesterday’s bearish U.S. oil statistics and economic data cast a shadow over the market, rallying stock markets and demand from other parts of the world like China are providing support,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. Crude oil for October delivery rose as much as 80 cents to $73.22 a barrel in electronic trading on the New York Mercantile Exchange, and was at $73.07 at 10:22 a.m. London time. Brent crude oil for October settlement increased 74 cents to $74.22 a barrel on the London-based ICE Futures Europe Exchange. The dollar traded at $1.2701 per euro, down from $1.2659 yesterday. Oil advanced 1.2 percent yesterday as U.S. equities snapped a four-day losing streak. The gains came even as crude stockpiles rose 4.11 million barrels to 358.3 million barrels last week, according to a report from the Energy Department. Inventories were forecast to climb 300,000 barrels, according to the median of 17 analyst responses in a Bloomberg news survey. Relative Strength Index Crude’s 14-day relative strength index was at 38.1, compared with 65 three weeks earlier. A reading of 30 indicates that prices are oversold and may rally. London-based Premier Oil Plc expects short-term “weakness” in prices before they return to a “reasonable” level of $80 a barrel in the longer-term, Chief Executive Officer Simon Lockett said today. Kuwait is satisfied with oil prices and expects them to pick up in the fourth quarter, Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said yesterday. U.S. gasoline inventories rose 2.27 million barrels to 225.6 million in the week ended Aug. 20, the report showed. A 450,000-barrel drop was projected. Total consumption of petroleum products averaged 19.5 million barrels a day last week, down 1.2 percent from the seven days ended Aug. 13, the report showed. Crude imports increased 3.4 percent to 9.88 million barrels a day, the highest level since the week ended July 23. Tropical Storms “Fundamentals are still quite bearish,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The Energy Department data was quite bearish and looking ahead, economists are predicting growth in the U.S. to slow.” Tropical Storm Earl, the fifth named storm of the Atlantic season, developed “ahead of schedule” off the coast of Africa to join Hurricane Danielle on a trek to the west, the National Hurricane Center said. The 2010 season has been ahead of the statistical average since June, when the first hurricane of the year formed. That usually doesn’t happen until Aug. 10, said Dennis Feltgen, a spokesman for the center. The year 1966 is used as a starting point because that was when continuous satellite coverage of Atlantic storms began, he said. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

Source