July 15 (Bloomberg) -- Crude oil rose after a government report showed a bigger-than-forecast decline in U.S. crude inventories as refineries increased operating rates. Supplies fell 2.81 million barrels to 344.5 million last week, the Energy Department said today. Stockpiles were forecast to drop 2.1 million barrels, according to analysts surveyed by Bloomberg News. Refineries operated at 87.9 percent of capacity, the most since August. Oil also climbed as a global equity rally raised optimism that the economy will strengthen. “The major reason for today’s rise is the correlation between equities and oil,” said Bill O’Grady, the chief markets strategist at St. Louis-based Confluence Investment Management LLC, an investment advisory company. “The drop in crude-oil stocks was a little bigger than forecast. Earnings are better than expected and that’s pushing up stocks and oil.” Crude oil for August delivery rose 89 cents, or 1.5 percent, to $60.41 a barrel at 10:54 a.m. on the New York Mercantile Exchange. Futures traded at $60.81 a barrel before the release of the report at 10:30 a.m. in Washington. Gasoline inventories climbed 1.44 million barrels to 214.6 million, the highest since April, the report showed. Supplies were forecast to increase 875,000 barrels, according to the median of 14 estimates by analysts in the Bloomberg News survey. Industrial production in the U.S. fell in June at the slowest pace in eight months, adding to signs the worst of the recession is over. Factory Output The 0.4 percent decrease in output at factories, mines and utilities was smaller than forecast and followed a revised 1.2 percent drop in May, Federal Reserve figures showed today in Washington. Production was forecast to fall 0.6 percent after a previously reported 1.1 percent drop in May, according to the median estimate of 73 economists surveyed by Bloomberg News. Other reports today showed manufacturing in the New York region shrank this month at the slowest pace in more than a year and the cost of living rose more than forecast in June. Nigeria’s main rebel group threatened to call off a 60-day cease-fire announced overnight following reports that the military is planning to raid one of its camps in the oil-rich Niger Delta region. The cease-fire will be suspended “with immediate effect” should reports of an attack prove true, Jomo Gbomo, a spokesman for the Movement for the Emancipation of the Niger Delta, said in an e-mailed statement today. Attacks on facilities in the delta region, home to Nigeria’s oil industry, have cut more than 20 percent of the nation’s oil exports since 2006. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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