Oil rose a second day in New York as rebounding equity markets and a drop in U.S. crude supplies tempered concern that the economic recovery is unraveling. Futures climbed as much as 1.9 percent, reversing an earlier 2.1 percent decline. European stocks rose from a two- year low. U.S. crude inventories dropped the most since December last week, the Department of Energy said yesterday. Prices in London, at about $107 a barrel today, may rise as high as $130 over the next 12 months as producers such as Saudi Arabia curb output, according to Barclays Plc. “Yesterday’s were the first set of supportive statistics we’ve had in a long time,” said Christophe Barret, a London- based analyst at Credit Agricole CIB who predicted in June that oil would decline “significantly” this summer. “But I see further downside to oil prices as austerity policies, monetary tightening and high prices contribute to slower economic growth.” Crude for September delivery rose as much as $1.56 to $84.45 a barrel on the New York Mercantile Exchange, and was at $84.36 at 9:06 a.m. London time. It earlier dropped as much as $1.75 to $81.14. Prices have risen 7.2 percent in the past year. Brent oil for September settlement gained $1.01, or 1 percent, to $107.69 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $23.39 to U.S. futures, having earlier widened to a record of $25.54. U.S. Supplies The Organization of Petroleum Exporting Countries’ 12 members boosted production by 400,000 barrels a day last month to an average of 30.07 million a day, the group said in a report on Aug. 9. “The big downside protection for oil, relative to most other assets, is that OPEC can cut supply to restore the balance,” Barclays analysts including New York-based Helima Croft said in a report. “With so little spare capacity, Saudi Arabia is the world’s sole swing producer, giving it a level of control not seen since the heights of OPEC in the 1970s.” OPEC will need to produce 31 million barrels a day to balance the market this quarter, or 1 million barrels a day more than current production, Standard Chartered Plc said. U.S. crude-oil inventories decreased 5.23 million barrels to 349.8 million last week, according to an Energy Department report. It was the biggest decline since the week ended Dec. 17. Inventories were forecast to climb 1.35 million barrels, according to a Bloomberg News survey of analysts. ‘Almost Unanimously Bullish’ Total products supplied, a measure of demand, surged 652,000 barrels a day to 20.3 million, the highest level since Dec. 24, according to the Energy Department report. Gasoline stockpiles dropped 1.59 million barrels to 213.6 million. “Yesterday’s DOE report was almost unanimously bullish,” Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania, said in a note to clients today. “We are looking for a recoupling of the dollar- oil link. Whether the Fed is aware of it or not, it likely just sowed the seeds of another rally in oil.” The dollar fell after the Federal Reserve this week said it may expand stimulus, increasing the appeal of commodities. The dollar fell to $1.4247 per euro from $1.4178 in New York yesterday, when it climbed 1.4 percent. A weaker U.S. currency typically bolsters demand for dollar-priced assets such as oil. To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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