Oil advanced from a two-week low in New York after President Barack Obama said leaders of both parties in the U.S. House and Senate approved a deal to raise the nation’s debt ceiling, stoking optimism over the economic recovery in the world’s biggest crude-consuming nation. Futures surged as much as 1.7 percent after Obama spoke from the White House and Senate Majority Leader Harry Reid endorsed the emerging accord between Republican leaders and the administration. The U.S. won’t default on its obligations, Senate Minority Leader Mitch McConnell said. A Labor Department report on Aug. 5 may show July payrolls rose by 90,000 workers. “It’s a sigh of relief,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil will average $100 a barrel this year. “It’s euphoric and oil has the potential to hit back through the top end of the range. Unemployment this week is the key.” Crude for September delivery rose as much as $1.59 to $97.29 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.93 at 2:01 p.m. Sydney time. The contract slipped $1.74 to $95.70 on July 29, the lowest settlement since July 14. Prices gained 0.3 percent last month and are 19 percent higher the past year. Brent oil for September settlement climbed $1.41, or 1.2 percent, to $118.15 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $21.23 to New York futures, compared with a record close of $22.63 on July 14. Debt Deal Congressional leaders are sifting through the details of the tentative bipartisan agreement to raise the debt ceiling, preparing to sell the deal to skeptical Republicans and Democrats ahead of possible votes today. The framework would raise the $14.3 trillion debt ceiling through 2012, cut spending by about $1 trillion and call for enactment of a law shaving another $1.5 trillion from long-term debt by 2021 -- or institute punishing reductions across all government areas, including Medicare and defense programs, according to congressional officials. “Prices moved sharply higher because of Obama’s speech,” said Ken Hasegawa, a commodity-derivatives sales manager at broker Newedge Group in Tokyo, who predicts oil will trade between $95 and $105 a barrel in the short term. “This market can avoid a collapse. The recovery of the global economy and increasing demand for winter fuels will push it higher.” Chinese Manufacturing A Chinese manufacturing index was higher than economists estimated in July, signaling the world’s second-biggest economy is withstanding interest-rate increases and tighter credit. The Purchasing Managers’ Index was at 50.7 for July compared with 50.9 in June, the China Federation of Logistics and Purchasing said in a statement today. That was more than every forecast in a Bloomberg News survey of 13 economists. The median estimate was for a reading of 50.2. Crude in New York is approaching technical resistance at the 50-day moving average of $97.28 a barrel, according to data compiled by Bloomberg. Futures dropped to as low as the 200-day mean of $94.95 on July 29. A breach of chart resistance typically means prices will continue to rise. Oil also rose as hedge funds increased bullish bets on gasoline for a fifth consecutive week, pushing futures to the highest since May. Large speculators increased wagers on rising prices by 1.9 percent in the week ended July 26 as U.S. imports declined and falling refinery output crimped supply, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the highest total since April 11. Storm Watch Oil and gas companies in the Gulf of Mexico are restoring production after Tropical Storm Don dissipated over Texas, the Bureau of Ocean Energy Management, Regulation and Enforcement said yesterday. About 6 percent of oil output and 3.5 percent of gas pumping in the Gulf was shut in as of 11:30 a.m. Central time, down from 11.9 percent and 6.2 percent respectively at the height of the storm, according to the bureau. Tropical Storm Eugene may strengthen to become a hurricane by tomorrow, according to the U.S. National Hurricane Center. The fifth named storm of the Eastern Pacific season is moving west-northwest over open water about 420 miles (676 kilometers) south-southwest of Acapulco, Mexico, at 10 miles per hour, the center said in an advisory at 11 p.m. Miami time yesterday. The Organization of Petroleum Exporting Countries’ crude output rose in July to the highest level since December 2008, led by gains in Saudi Arabia and Angola, according to a Bloomberg News survey. Production increased 245,000 barrels, or 0.8 percent, to average 29.565 million barrels a day, according to the survey of oil companies, producers and analysts. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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