Crude Oil Rises as Possible Rate Cut May Revive Fuel Demand

By Mark Shenk

Oct. 29 (Bloomberg) -- Crude oil rose for the first time in four days on signs that efforts to unlock global credit markets are beginning to work and central bank interest-rate cuts may help revive demand.

Oil advanced as much as 6.8 percent after European and Asian equity markets rallied. Prices also gained on forecasts that the U.S. Federal Reserve will cut rates today to help spur a recovery in the world's biggest fuel consuming country. China cut rates today and the European Central Bank may reduce them next week.

``The market is up on anticipation that there will be coordinating interest-rate cuts,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York.

Crude oil for December delivery rose $4.01, or 6.4 percent, to $66.74 a barrel at 9:02 a.m. on the New York Mercantile Exchange. Futures touched $61.30 on Oct. 27, the lowest since May 9, 2007. Prices, which have tumbled 55 percent since reaching a record $147.27 on July 11, are down 29 percent from a year ago.

The Federal Reserve may lower its benchmark interest rate by half a point to 1 percent today, according to the median forecast of economists surveyed by Bloomberg News.

``Energy markets are moving on exogenous factors, such as equity and currency markets, not the energy fundamentals,'' Barakat said.

U.S. Inventories

The U.S. Energy Department will probably report that inventories of crude oil, gasoline and distillate fuel, a category that includes heating oil and diesel, rose last week, a Bloomberg News survey showed. The department is scheduled to release its weekly report today at 10:35 a.m. in Washington.

Crude oil supplies climbed 1.55 million barrels in the week ended Oct. 24 from 311.4 million the week before, according to the median of 12 analyst estimates before the report.

The Organization of Petroleum Exporting Countries will ``probably'' cut crude-output quotas a second time to avoid the growth of inventories, Venezuelan Oil Minister Rafael Ramirez said in an interview on state television.

OPEC reduced its production target by 1.5 million barrels a day after meeting Oct. 24. Ramirez said the group would analyze the reaction of the oil market between that cut and a planned Dec. 17 meeting.

Brent crude oil for December settlement increased $4.15, or 6.9 percent, to $64.67 a barrel on London's ICE Futures Europe exchange. Futures touched $59.02 on Oct. 27, the lowest since Feb. 22, 2007.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.