Bloomberg Crude Oil Rises to Highest Since November on Manufacturing Gain

June 1 (Bloomberg) -- Crude oil rose to the highest level since November as China’s manufacturing expanded and U.S. industrial output shrank less than forecast, signaling that fuel demand may increase.

Oil gained as much as 3.6 percent and equities rallied after China’s Purchasing Manager’s Index showed that manufacturing in May climbed for a third month. The Institute for Supply Management’s U.S. factory index strengthened to 42.8 from 40.1 in April. A government report on June 3 will probably show that U.S. oil inventories dropped for a fourth week.

“The Chinese and ISM manufacturing numbers are very bullish for oil demand,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “Crude oil supplies are finally falling. This trend has also been very supportive.”

Crude oil for July delivery gained $2.27, or 3.4 percent, to $68.58 a barrel at 3:01 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 4. Prices are up 54 percent this year.

The Standard & Poor’s 500 Index increased 2.6 percent to 942.87 at 4:09 p.m. in New York, its highest close since November. The Dow Jones Industrial Average climbed 2.6 percent to 8,721.44.

Economists expected the ISM’s U.S. manufacturing index to climb to 42.3, according to the median of responses in a Bloomberg News survey. Readings of less than 50 on the Tempe, Arizona-based group’s gauge signal a contraction.

The U.S. and China are the biggest oil-consuming countries, responsible for 33 percent of global demand in 2007, according to BP Plc, which publishes its BP Annual Statistical Review of World Energy each June.

U.S. Inventories

U.S. crude-oil stockpiles probably dropped 1.75 million barrels in the week ended May 29, according to the median of eight estimates by analysts before an Energy Department report on June 3.

“We’re certainly on our way to $70, if not $75,” said Stephen Schork, president of Schork Group Inc. of Villanova, Pennsylvania. “That seems to be the number everyone is talking about. Given the technical momentum in this market, you cannot bet against it and step in front of this train.” more...