Crude oil rose after the European Central Bank unexpectedly lowered interest rates and as the region’s leaders raised the prospect of Greece leaving the euro. Futures increased as much as 1.9 percent as the ECB reduced the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. European leaders meeting in the French resort of Cannes late yesterday cut off aid to Greece after Prime Minister George Papandreou called for a referendum on a bailout package. “The ECB decided to surprise nearly everyone and cut its key lending rate,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The announcement put a bounce in equities and crude went along.” Oil for December delivery rose $1.21, or 1.3 percent, to $93.72 a barrel at 11:58 a.m. on the New York Mercantile Exchange. Futures touched $94.23, a one-week high. The contract earlier dropped as much as $1.64 to $90.87. Brent oil for December settlement increased 53 cents, or 0.5 percent, to $109.87 a barrel on the London-based ICE Futures Europe exchange. Oil pared gains after ECB President Mario Draghi said that Europe is heading toward a “mild recession.” Today’s rate cut came after the first meeting with Draghi in charge of the central bank. He succeeded Jean-Claude Trichet on Nov. 1. “We’re living headline-to-headline today,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s a lot of conflicting information out here, which is making the market very volatile.” Merkel and Sarkozy German Chancellor Angela Merkel and French President Nicolas Sarkozy led calls to make the Greek referendum a vote on whether to stay in the euro or return to the Greek drachma. Sarkozy said Papandreou’s government won’t get a “single cent” of assistance if voters reject the bailout plan. “We now have to put on ice the solution we formulated” at a Brussels summit last week “because we don’t know how things will develop in Greece,” Luxembourg Prime Minister Jean-Claude Juncker said on his country’s Radio 100.7 today. “Greece had the prospect of 8 billion euros which it has now forfeited.” Papandreou will reach out to the opposition about forming a transitional government, according to an e-mailed transcript of his comments to cabinet members in Athens. “We’re hanging onto any news on what will happen with the referendum in Greece,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “Early today investors were dumping risky assets and now they are piling them on amid greater optimism about the European situation.” Pressing Italy Italian Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti were told by Merkel to press ahead with budget-balancing measures and not drag their feet, a German official said. U.S. Labor Department figures today showed that fewer Americans filed applications for unemployment benefits last week. Jobless claims fell by 9,000 to 397,000 in the week ended Oct. 29, the fewest in a month. The median forecast of 49 economists in a Bloomberg News survey called for a drop to 400,000. The total number of people on unemployment benefit rolls decreased to a six-month low. “A lot of non-oil information is moving the market today,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “We’re spending a lot of time handicapping what’s going on in Europe.” The Standard & Poor’s 500 Index rose 0.9 percent to 1,248.87, and the Dow Jones Industrial Average (INDU) climbed 0.9 percent to 11,946.31. 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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