By Grant Smith May 12 (Bloomberg) -- Crude oil rose, reversing earlier losses, as advancing equity indexes restored confidence in the economic recovery while a weaker dollar heightened the commodity’s appeal for hedging inflation. U.S. crude oil inventories probably increased 1.6 million barrels in the week ended May 7, according to a Bloomberg survey before an Energy Department report today. Yesterday the American Petroleum Institute also reported a supply gain for the period. The International Energy Agency cut its 2010 global oil demand forecast by 220,000 barrels a day to 86.4 million a day. “Risk sentiment has improved as bit after a rebound in equities, and with the euro trimming earlier losses, so we’re seeing an overall rebound,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “Attention will turn back to the fundamentals today with the inventory report.” Crude oil for June delivery was 17 cents higher at $76.54 a barrel on the New York Mercantile Exchange as of 9:22 a.m. London time. Brent crude oil for June settlement climbed as much as 76 cents, or 0.9 percent, to $81.25 on the London-based ICE Futures Europe exchange. Futures rebounded 2.3 percent on May 10 after leaders of the 16 European nations using the single currency agreed to lend as much as 750 billion euros ($947 billion) to resolve Greece’s debt crisis. Oil and equity markets have since dropped on concern the bailout won’t address the underlying deficits accumulated by countries including Spain and Portugal. “There’s some skepticism about the ultimate effectiveness of the European Union bailout package,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “Sovereign-debt concerns raise concern about the prospects of a recovery in Europe and globally, and therefore fuel demand.” The dollar weakened against the euro to $1.2718 as of 9:29 a.m. in London from $1.2662 in New York yesterday, while the Stoxx Europe 600 Index rose 1.3 percent to 256.26. Crude stockpiles in the U.S., the world’s biggest energy consumer, rose 362,000 barrels last week, the American Petroleum Institute said yesterday. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. New York oil for June delivery is $4 a barrel lower than for July, the widest divergence between front-month contracts since Feb. 13, 2009. The spread between June and December futures is $9.28, a contango that favors the storing of supplies. To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net

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