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By Bloomberg

Oil rose for the first time in three days amid speculation that demand is strengthening, curbing a supply surplus.

Futures gained as much as 3.5 percent in New York, after falling 7.6 percent over the past two days. Demand is increasing and there are indications that prices are stabilizing, according to Saudi Arabia’s Oil Minister Ali al-Naimi. The profitability of producing gasoline in northwest Europe climbed to the highest in more than four months, according to PVM Oil Associates data. U.S. crude stockpiles increased for a fifth week to the highest in more than 30 years, data from the Energy Information Administration show.

Rising U.S. supplies contributed to a global surplus that drove futures almost 50 percent lower last year. West Texas Intermediate, the U.S. benchmark, has rebounded 15 percent from its January low as producers idled drilling rigs and cut spending plans. Further price declines are needed for U.S. output growth to slow enough to re-balance global markets, Goldman Sachs Group Inc. said in a Feb. 10 report.

“Products are strong, margins are strong, creating some demand for crude oil,” Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix GmbH, said by e-mail. “The market is starting to consolidate and in the current conditions it will be difficult to go for the drop to $20 a barrel that some have called.”

WTI for March delivery climbed as much as $1.70 to $50.54 a barrel in electronic trading on the New York Mercantile Exchange and was at $49.97 at 1:11 p.m. London time. The contract fell $1.18 to $48.84 on Wednesday. The volume of all futures traded was about 10 percent above the 100-day average for the time of day. Prices have decreased 6.2 percent this year.

U.S. Supplies

Brent for March settlement, which expires Thursday, advanced as much as $1.63, or 3 percent, to $56.29 a barrel on the London-based ICE Futures Europe exchange. It dropped $1.77 to $54.66 on Wednesday. The more-active April contract gained as much as $1.68 at $57.60. The European benchmark crude traded at a premium of $5.66 to WTI.

U.S. crude stockpiles expanded by 4.87 million barrels last week to 417.9 million, the highest level in weekly records dating back to August 1982, according to the EIA, the U.S. Energy Department’s statistical arm. The increase exceeded a projected gain of 3.75 million in a Bloomberg News survey.

Production rose by 49,000 barrels a day to 9.23 million a day, according to EIA data. That’s the highest level in weekly data that started in January 1983. The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.

Market ‘Improvement’

Saudi Arabia’s Al-Naimi discussed a “relative improvement” in the oil market with Algeria’s justice minister at a meeting in Riyadh on Wednesday, the Saudi Press Agency reported. Increased demand, the stability of prices and the importance of cooperation among oil producers were mentioned, it said. Algeria is one of four OPEC members from Africa.

Saudi Arabia led a decision by the Organization of Petroleum Exporting Countries in November to maintain collective output quotas at 30 million barrels a day. The 12-member group, which supplies about 40 percent of the world’s crude, pumped 30.9 million a day in January, exceeding its target for an eighth straight month, a separate Bloomberg survey of oil companies, producers and analysts showed.

Gasoline’s premium to Brent crude rose to $7.14 a barrel Wednesday, the highest since Sept. 30, PVM data show.

The largest U.S. refinery strike since 1980 is set to continue for at least another week after labor-contract negotiations stalled between the United Steelworkers union and companies represented by Royal Dutch Shell Plc.

The union, which is bargaining for workers at more than 200 refineries, fuel terminals, pipelines and chemical facilities across the U.S., began the strike Feb. 1 at seven sites. Talks have been suspended until Feb. 18.