Crude oil rose as equities climbed and Japan’s economy contracted less than economists estimated in the second quarter. Futures advanced 2.9 percent after Google Inc. (GOOG) agreed to buy mobile-phone maker Motorola Mobility Holdings Inc. for $12.5 billion. Japan’s gross domestic product shrank at an annualized 1.3 percent rate in the three months ended June 30, the Cabinet office said in Tokyo. Economists forecast a 2.5 percent drop, according to a Bloomberg News survey. “Oil will be taking its direction from the equity market and the economy,” said Carl Larry, director of energy derivatives and research at Blue Ocean LLC in New York. “Everyone will be on pins and needles until we have a better idea of where this economy, and with it oil demand, is going to go.” Crude oil for September delivery increased $2.50 to settle at $87.88 a barrel on the New York Mercantile Exchange. Futures are up 17 percent in the past year. Brent oil for September settlement rose $1.88, or 1.7 percent, to $109.91 on the London-based ICE Futures Europe. The European benchmark traded at a $22.03 premium to U.S. futures, down from a record $25.54 on Aug. 11. The Standard & Poor’s 500 Index advanced 1.9 percent to 1,200.74 and the Dow Jones Industrial Average gained 1.7 percent to 11,454.48. “It seems like the crude-oil market is following equities,” said Kyle Cooper, director of research for IAF Advisors in Houston. Euro Gain The euro climbed on speculation a meeting tomorrow between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Paris may result in action to contain the region’s debt crisis. The dollar dropped 1.4 percent to $1.4444 against the euro, from $1.4248 Aug. 12. A weaker U.S. currency bolsters the appeal of dollar-denominated raw materials as an investment. “The European situation seems to have settled down since last week,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Things are a little calmer, which is good for the market.” Middle East crude oil for sale to Asia traded near the highest level in a week as profits from making gasoil rebounded. Murban oil’s premium over spot prices was the widest in two months. Murban for loading in October traded at a premium of 16 cents a barrel to its official selling price for a second day, according to data compiled by Bloomberg. The gap is the highest since June 3 as the profit from making gasoil rebounded from a 3.8 percent decline last week. Murban is produced by the Abu Dhabi National Oil Co. Watching Gert Tropical Storm Gert is turning north-northeast on a track away from Bermuda and the North American coast, while a new system over the Lesser Antilles will probably move toward Mexico, forecasters said. Both Gert and a cluster of thunderstorms to the southeast that lost strength today “are going to be fish storms,” said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland. Gert, with top winds of 60 miles (97 kilometers) per hour, was 155 miles east-southeast of Bermuda and moving north at 12 mph, the U.S. National Hurricane Center said in an advisory at about 10:40 a.m. East Coast time. Gert is the seventh named storm of the Atlantic hurricane season, which began June 1 and ends Nov. 30. None of the storms have become hurricanes. From 1966 to 2009 there were, on average, 11.3 named storms, of which 6.2 became hurricanes, according to the NHC website. Hedge Funds Hedge funds reduced bullish bets on New York crude to the lowest level in more than eight months in the week ended Aug. 9, according to a report last week. The funds and other large speculators cut their net-long positions, or wagers that prices will rise, by 17,313 futures equivalents, or 11 percent, to 142,938, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Speculative bets that Brent will rise, in futures and options combined, outnumbered short positions by 48,852 contracts, the London-based exchange said today in the Commitment of Traders report. Net-long positions fell by 47,019 contracts from 95,871 a week earlier. “It appears that investors are ready to get back into the market after the big sell-off,” Lynch said. Manufacturing in the New York region unexpectedly contracted for a third straight month in August as orders and inventories dropped, a sign the industry that has led the economic recovery is at risk of stumbling. The Federal Reserve Bank of New York’s general economic index fell to minus 7.7 from minus 3.8 in July, a report showed today. The median forecast in a Bloomberg survey called for an index of zero, the dividing line between expansion and contraction. The so-called Empire State Index covers New York, northern New Jersey and southern Connecticut. Oil volume in electronic trading on the Nymex was 520,834 contracts as of 3:35 p.m. in New York. Volume totaled 662,052 contracts on Aug. 12, 2.9 percent below the average of the past three months. Open interest was 1.57 million contracts. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net Moming Zhou in New York at Mzhou29@bloomberg.net; To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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