Oil advanced from a two-day low in New York as investors bet that shrinking fuel stockpiles in the U.S. indicate demand will increase in the world’s biggest crude- consuming nation. Futures rose as much as 1.3 percent before an Energy Department report today that may say crude and gasoline stockpiles fell last week. The industry-funded American Petroleum Institute said yesterday gasoline supplies slid the most in almost five months. Inventories typically shrink in summer amid the May-to-September peak driving season. “It’s clearly the inventories supporting prices today,” Thina Saltvedt, an analyst at Nordea Bank AB in Oslo who expects the price of North Sea Brent oil to be capped at $118 a barrel this quarter, said by phone. “It would be interesting to look at the demand figures later today.” Crude for September delivery rose as much as $1.16 to $87.81 a barrel in electronic trading on the New York Mercantile Exchange, and was at $87.75 at 10:43 a.m. London time. The contract yesterday slipped 1.4 percent to $86.65. Prices have risen 16 percent in the past year. Brent for October settlement climbed $1.22, or 1.1 percent, to $110.35 a barrel on the ICE Futures Europe exchange in London. It lost 71 cents to $109.13 yesterday. The September contract, which expired yesterday, fell 0.4 percent to $109.47. Fuel Supplies U.S. gasoline stockpiles shrank 5.37 million barrels to 205.8 million last week, according to the report from the API. It was the biggest decline since the week ended March 18. Supplies are about 1.4 percent below their five-year average, according to API data. Demand for the fuel peaks between the Memorial Day holiday in May and Labor Day in early September. The drop is “price supportive, there’s no doubt about it, but I don’t think you can read too much into it,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts crude will average $100 a barrel this year. “I’d prefer to see what the Energy Department come out with. The market will watch to see how we go with producer prices and the inventory data.” U.S. crude-oil inventories rose 1.75 million barrels, the API data showed. An Energy Department report today may show crude supplies slipped 500,000 barrels and gasoline stockpiles dropped 1.2 million barrels, according to a Bloomberg News survey of analysts. The API collects stockpile data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time in the past year and 75 percent in the past four years. OPEC Output Iran’s foreign minister said today the nation sees no grounds for increasing output quotas by the Organization of Petroleum Exporting Countries. There is sufficient supply of oil in the market, Minister Ali Akbar Salehi said in Moscow. The U.S. producer price index probably climbed 0.1 percent in July after declining 0.4 percent the prior month, according to the median estimate of analysts in a Bloomberg survey before a report today. Tropical Storm Gert degenerated in the North Atlantic far from land, while Tropical Storm Fernanda gained strength in the eastern Pacific, the National Hurricane Center said. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Nidaa Bakhsh in London at nbakhsh@bloomberg.net To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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