Oil Trades Near Four-Day High Before Report That May Show Stocks Declined

Oil traded near the highest close in four days before a report that may show U.S. crude supplies fell to the lowest in five months.

Futures rose 0.9 percent to $88.61 a barrel yesterday, the highest close since Dec. 7, after China said its refineries ran at record rates last month, signaling demand is increasing in the world’s biggest energy user. U.S. crude stockpiles probably dropped to the lowest since July 9, according to a Bloomberg News survey before an Energy Department report tomorrow.

The January contract traded at $88.53 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 8:58 a.m. Singapore time. It earlier slid as much as 0.5 percent. Prices are up 12 percent this year.

Crude prices will rise above $100 a barrel by the second half of next year as U.S. demand recovers and global inventories decline, Goldman Sachs Group Inc. said in its 2011 commodities outlook, dated yesterday.

U.S. oil stockpiles fell 2.6 million barrels in the seven days to Dec. 10, according to the median of 11 analysts’ estimates. Gasoline inventories probably increased for a fourth week, gaining 2 million barrels last week from 214 million, according to the survey.

Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably slipped 1 million barrels from 160.2 million. Six of the respondents forecast a decline, four projected a gain and one said there was no change.

The Energy Department is scheduled to release its weekly report at 10:30 a.m. on Dec. 15 in Washington. The industry- funded American Petroleum Institute will publish its own estimates today.