Oil rose for a third day in New York on shrinking stockpiles and signs of economic improvement in the U.S., the world’s largest consumer of crude.

West Texas Intermediate futures gained as much as 1.6 percent, while Brent oil in London surpassed $100 a barrel for the first time since June 1. U.S. crude inventories fell 1.8 million barrels last week to 384.1 million barrels, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today may show supplies slid by 500,000 barrels, according to a Bloomberg News survey. Bank of America Corp. cut price forecasts for the year’s second half and 2013.

“The U.S. recovery is a bright star in a dim firmament,” said Christopher Bellew, senior broker at Jefferies Bache Ltd. in London. “But there is no reason for prices to hold here, and the market may well turn lower again.”

Oil for July delivery climbed as much as $1.38 to $85.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.31 at 1:33 p.m. London time. The contract yesterday rose 0.4 percent to $84.29, the highest close since May 31. Prices are 14 percent lower this year.

Brent oil for July settlement gained as much as $1.77, or 1.8 percent, to $100.61 and was at $100.20 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to WTI was at $14.89, compared with $14.55 yesterday.

Relative Strength

New York crude is set to rebound based on a technical indicator that shows a decline of more than 20 percent from this year’s high into bear market conditions is the most-exaggerated drop in more than 26 years.

The relative strength index, or RSI, has been below 30 since May 11, signaling that oil is poised to climb, said Richard Ross, a technical analyst at brokerage Auerbach Grayson & Co. in New York. The 14-day RSI, which identifies possible turning points in markets, dropped to 16.3 on June 1, the lowest level since February 1986.

Oil is unlikely to collapse as it did in 2008 because long- term fundamentals haven’t changed and supply may not keep up with demand, Royal Dutch Shell Plc Chief Executive Officer Peter Voser said yesterday in Kuala Lumpur. It would be “irresponsible” to say that a few weeks of worse-than-expected economic data has significantly changed the market outlook, Maria van der Hoeven, the head of the International Energy Agency, said in the Malaysian capital.

Economic Outlook

Bank of America trimmed estimates for Brent crude in the second half to $106 a barrel, from $110, and for West Texas Intermediate to $97 from $107, according to an e-mailed report. It lowered 2013 forecasts for Brent to $110 from $120 and for WTI to $100 from $111.

“Europe is now facing the increased possibility of a full- blown banking crisis,” said Francisco Blanch, head of commodities research for Bank of America in New York. “In addition to weakening oil demand in Europe, growth in emerging markets and the U.S. is softer than anticipated.”

The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the U.S. economy, rose to 53.7 last month from April’s 53.5, the Tempe, Arizona-based group said yesterday. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Readings above 50 signal expansion.

U.S. gasoline stockpiles rose 1.4 million barrels last week, figures from the API showed. They are forecast to climb 950,000 barrels in the Energy Department report, according to the median estimate of 12 analysts in the Bloomberg survey. Distillate inventories, a category that includes diesel and heating oil, gained 1.8 million barrels compared with a projected 250,000 increase.

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. The Department is scheduled to release its report at 10:30 a.m. in Washington.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

Source: http://www.bloomberg.com/news/2012-06-06/oil-gains-a-third-day-on-demand-outlook-as-crude-stockpiles-drop.html