Oil gained for a second day in New York after U.S. crude inventories unexpectedly declined and China’s processing rose to a record. Futures jumped 1.3 percent to settle at a two-year high yesterday after the Energy Department said supplies dropped 3.27 million barrels to 364.9 million last week. Stockpiles were forecast to increase 1.5 million barrels, according to a Bloomberg News survey of analysts. China’s refiners processed 12 percent more crude in October from a year earlier, according to China Mainland Marketing Research Co. “The big thing has been the belter of an inventory report out of the U.S.,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “While the oil market is still in surplus, it does point to signs that we’re seeing some tightening.” The December contract climbed as much as 54 cents, or 0.6 percent, to $88.35 a barrel in electronic trading on the New York Mercantile Exchange, and was at $88.29 at 1:15 p.m. Singapore time. Yesterday, it surged $1.09 to $87.81, the highest settlement since Oct. 8, 2008. Oil is up 1.6 percent this week and 11 percent higher this year. Crude inventories at Cushing, Oklahoma, the delivery point for New York futures, slid 1.75 million barrels to 31.8 million, the biggest volume drop since September 2009. Stockpiles are at the lowest level since the week ended April 2. Refineries operated at 82.4 percent of capacity, up 0.6 percentage point from the previous week, the report showed. Imports fell 5.7 percent to 8.09 million barrels a day, the lowest level since January. Fuel Inventories Supplies of distillate fuel, a category that includes heating oil and diesel, declined 4.97 million barrels to 159.9 million last week, the seventh straight drop, according to the department. It was the biggest volume decrease since February 2007. Inventories were forecast to slip 2 million barrels, according to the Bloomberg News survey. Gasoline stockpiles dropped 1.92 million barrels to 210.3 million, the lowest level since November, 2009. A 1 million- barrel decline was projected. Chinese state oil companies are boosting processing in a bid to ease diesel shortages in the southern part of the nation caused by farmers and factories burning more fuel. China Petroleum & Chemical Corp., the nation’s largest refiner, increased production to a record in October, parent China Petrochemical Corp. said on Nov. 4. Climbing Higher Oil futures have room to rise because prices are still below the 50 percent Fibonacci retracement level, according to Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo. That level is at $89.84 a barrel, based on Fibonacci retracements of crude prices in the last five years. “Until the crude market goes up to the 50 percent rebound line, it’s still possible to go to the upper side,” Hasegawa said. “Brent is very near to $90 a barrel. That is a target technically.” Brent crude for December settlement advanced as much as 44 cents, or 0.5 percent, to $89.44 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it climbed 67 cents, or 0.8 percent, to $89. The longest period of contango in the U.S. oil market may end as storage capacity expands by more than a quarter at Cushing, Oklahoma, the biggest U.S. crude-trading hub. West Texas Intermediate oil for delivery next month traded at $1.86 a barrel less than the six-month contract on the New York Mercantile Exchange yesterday, compared with $9.88 a barrel in May. The contango, in which prompt oil is cheaper than later delivery, has averaged $2.70 during the past five years. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net To contact the editor responsible for this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net

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