Oil gained a second day as investors speculated fuel demand may increase after an industry report showed crude stockpiles shrinking in the U.S., the world’s biggest consumer of the commodity.

West Texas Intermediate futures climbed as much as 0.5 percent inNew York from the highest close in a week yesterday. U.S. crude inventories fell 4.5 million barrels in the seven days ended Feb. 3, the first drop in three weeks, the American Petroleum Institute said after the settlement. An Energy Department report today may show supplies rose 2.5 million barrels, according to a Bloomberg News survey of analysts.

“The API data provided momentum for the price gains,” said Ric Spooner, a chief analyst at CMC Markets in Sydney. “We remain in a range. Front-month prices for West Texas are in a trend channel pattern, with the range broadly between about $95.50 on the downside and $100.50 on the upside.”

Oil for March delivery advanced as much as 44 cents to $98.85 a barrel in electronic trading on the New York Mercantile Exchange. It was at $98.67 at 11:48 a.m. Sydney time. The contract yesterday increased $1.50, or 1.6 percent, to $98.41, the highest settlement since Jan. 31. Prices are 13 percent higher the past year.

Brent oil for March settlement increased 30 cents, or 0.3 percent, to $116.23 a barrel on the ICE Futures Europe exchange yesterday. The benchmark contract’s premium to New York-traded West Texas Intermediate closed at $17.82, narrowing for the first time in nine days.

Price Outlook

West Texas Intermediate oil will average $100.40 a barrel this year, according to a projection from the U.S. Energy Department. The forecast is 15 cents higher than the January estimate of $100.25, the department said yesterday in its monthly Short-Term Energy Outlook.

U.S. gasoline stockpiles rose 4.4 million barrels last week, figures from the American Petroleum Institute show. They are forecast to gain 875,000 barrels in the government report, according to the median of 10 analyst estimates in the Bloomberg News survey. Inventories of distillates, a category that includes diesel and heating oil, climbed 386,000 barrels compared with a projection for an 875,000 barrel decline.

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.

Goldman Sachs Group Inc. recommended selling contracts of West Texas Intermediate crude for delivery in May and buying those for June, as rising inventories at the U.S. storage hub in Cushing, Oklahoma, will put pressure on short-term prices.

Crude inventories at Cushing, which typically drive the difference between monthly contracts, have increased by 2.8 percent this year to 30.1 million barrels, according to data from the Energy Department.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore atakwiatkowsk2@bloomberg.net

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