Crude oil advanced as declining U.S. jobless claims sent equities higher, adding to optimism that U.S. economy is strengthening. Futures climbed 3.4 percent after the Labor Department reported that applications for jobless benefits decreased 7,000 to 395,000 last week, the fewest since early April. Equities in the U.S. and Europe rebounded on the employment data. Crude slipped 2.2 percent earlier on concern that France’s creditworthiness was in doubt. “Oil came off its lows once the jobless numbers came out,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Worries about the debt crisis and economy are being played out in equities and oil is following.” Crude oil for September delivery rose $2.83 to settle at $85.72 a barrel on the New York Mercantile Exchange, extending a two-day gain to 8.1 percent. The contract fell as low as $81.03 and reached $84.45. Oil is up 9.9 percent from a year earlier. Brent oil for September settlement gained $1.34, or 1.3 percent, to end the session at $108.02 a barrel on the ICE Futures Europe exchange in London. The European benchmark’s premium to U.S. futures, which reached an intraday record of $25.54, fell to $22.30 from yesterday’s $23.79. The Standard & Poor’s 500 Index climbed 4.9 percent to 1,175.39, and the Dow Jones Industrial Average advanced 459.66 points, or 4.3 percent, to 11,179.60. All 10 groups in the S&P 500 advanced, with gains being led by financial, energy and technology companies. The index dropped 4.4 percent yesterday. S&P 500 “We’re keeping an eye on the S&P, but we don’t fully trust it after the recent erratic moves,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “A big day-to- day change in prices is becoming the norm.” Economists forecast 405,000 claims, according to the median forecast of 48 economists surveyed by Bloomberg News. The number of people on unemployment benefit rolls and those getting extended payments also dropped. Federal Reserve policy makers this week announced they would keep the benchmark lending rate near zero “at least” through mid-2013 to spur economic growth. French President Nicolas Sarkozy and German Chancellor Angela Merkel planned to meet next week as concern that the euro-area debt crisis will spread rattled French markets. The leaders of Europe’s two biggest economies will discuss economic governance of the 17-nation euro region in Paris on Aug. 16, according to separate statements issued today by Sarkozy and Merkel’s offices. OPEC’s Pricing Power Prices in London may rise to $130 in the next year as the Organization of Petroleum Exporting Countries’ 12 members such as Saudi Arabia curb output, Barclays Plc said. “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.” New York oil climbed to $114.83 a barrel on May 2 as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Syria, Yemen and Bahrain. Libyan output fell 50,000 barrels, or 33 percent, to 100,000 in July, the lowest since at least 1962 based on yearly data, a Bloomberg News survey showed. U.S. Inventories “I don’t think we’ve seen the absolute bottom, but I doubt we’ll see the oil market test $75,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The oil market is different from the global economy, because of the geopolitical risk. The conflict in Libya and the resulting disruption in supply are an example of what makes this market unique.” Oil rose 4.5 percent yesterday after an Energy Department report showed U.S. crude stockpiles fell 5.23 million barrels to 349.8 million last week, the biggest drop since December. Supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil, the grade traded in New York, tumbled 1.37 million barrels to 34.6 million, the lowest since November. Total fuel consumption climbed 3.3 percent to 20.3 million barrels in the week ended Aug. 5, the highest level since December, yesterday’s report showed. Oil volume in electronic trading on the Nymex was 892,411 contracts as of 3:10 p.m. in New York. Volume totaled 989,624 contracts yesterday, 44 percent above the average of the past three months. Open interest was 1.58 million contracts, the highest level since June 14. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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