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Crude Oil Trades Above $90 as U.S. Services Expand, Companies Add Workers

Oil traded above $90 for a second day after reports showed that U.S. service industries expanded and companies added workers in December, signaling that fuel demand may increase in the world’s biggest crude-consuming nation.

Futures gained 1 percent yesterday after the Institute for Supply Management’s non-factory index, which covers about 90 percent of the economy, rose to 57.1. An Energy Department report showed crude inventories declined 4.16 million barrels to 335.3 million last week, falling more than double what analysts forecast in a Bloomberg News survey.

“Crude oil rose overnight on signs that the U.S. economic recovery is continuing, with the release of stronger than expected services activity and employment figures,” Andrew McManus, an analyst at Australia & New Zealand Banking Group Ltd. in Sydney, said in a note today.

The February contract was at $90.29 a barrel, down 1 cent, in electronic trading on the New York Mercantile Exchange at 11:03 a.m. Singapore time. The future earlier gained as much as 41 cents, or 0.5 percent, to $90.71. Yesterday, it rose 92 cents to $90.30. Prices are 8.6 percent higher from a year ago.

A report yesterday from ADP Employer Services showed companies boosted payrolls in December by the most since records began in 2001. Employment jumped by 297,000, almost three times the 100,000 median estimate of economists surveyed.

Brent crude oil for February settlement was at $95.37 a barrel, down 13 cents, on the London-based ICE Futures Europe exchange. The contract rose $1.97, or 2.1 percent, to $95.50 a barrel yesterday.

European Growth

Europe’s services and manufacturing industries expanded more than estimated in December, led by the fastest growth in more than four years in Germany, the region’s largest economy.

A composite index based on a survey of euro-area purchasing managers in both industries held at 55.5 from November, London- based Markit Economics said yesterday. That compares with a Dec. 16 reading of 55. A figure above 50 indicates expansion.

U.S. inventories of crude have contracted 24.4 million barrels in five weeks. Stockpiles last week were forecast to decrease by 2 million barrels, according to the median of 17 analyst responses in a Bloomberg News survey. Refiners along the Gulf of Mexico Coast reduce stockpiles in December to lower year-end tax liabilities.

Gasoline supplies climbed 3.29 million barrels to 218.1 million, the Energy Department said. They were forecast to gain 500,000 barrels, according to the survey.

Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.15 million barrels to 162.1 million. A 750,000 barrel increase was projected.

West Texas Intermediate oil, the grade deliverable against the New York futures, is trading at a discount of $5.04 a barrel to Brent. The difference was $5.20 yesterday, the most since May 14. The spread widened after the Energy Department said today that supplies at Cushing, Oklahoma, the delivery point for the contract, rose 858,000 barrels to 37.5 million, the highest level since Aug. 6.