By Grant Smith and Christian Schmollinger Feb. 3 (Bloomberg) -- Crude oil rose in New York for a third day before a report forecast to show that U.S. supplies of distillate fuels such as heating oil shrank last week. Oil was also supported as a decline in the U.S. dollar heightened crude’s appeal for hedging inflation. The U.S. Energy Department will likely report a 1.15 million-barrel reduction in U.S. distillate stockpiles for the week ended Jan. 29, according to a Bloomberg News survey. OPEC is unlikely to change oil- production quotas at its meeting next month, group Secretary- General Abdalla el-Badri said yesterday. “All eyes are back on U.S. fuel inventories today and we expect a small draw in distillates,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “There’s no point in OPEC doing anything, as prices are okay for most members, while hiking output would oversupply the market.” Crude oil for March delivery rose as much as 81 cents, or 1.1 percent, to $78.04 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.87 at 9:35 a.m. London time. Yesterday, it gained 3.8 percent, the most since Sept. 30, to settle at $77.23. Brent crude oil for March settlement rose as much as 93 cents, or 1.2 percent, to $76.99 a barrel on the London-based ICE Futures Europe exchange. The contract earlier fell as much as 43 cents to $75.63. Yesterday, it rose 4 percent, the most since Nov. 16, to settle at $76.06. Dollar Index Falls The Dollar Index, which tracks the U.S. currency against those of six major trading partners, dropped for a third day before a report that may show U.S. service industries expanded at the fastest pace in more than a year. The index was at 78.708 at 9:27 a.m. London time. “If people are optimistic about the economy and buying equities, then that will drive oil prices higher,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “Having the dollar index drop below 79 is enough to move oil higher.” U.S. distillate stockpiles dropped 1.15 million barrels in the week ended Jan. 29 from 157.5 million the prior week, according to the median of 16 estimates in Bloomberg’s survey. The Energy Department will release its report at 10:30 a.m. in Washington. Analysts were split over whether stockpiles of crude oil rose or fell last week. Inventories climbed 400,000 barrels from 326.7 million the previous week, according to the survey. Eight of the respondents said there was a gain, six forecast a decline and two estimated that there was no change. Yesterday the industry-funded American Petroleum Institute said crude inventories rose 4.72 million barrels last week. The Organization of Petroleum Exporting Countries, responsible for 40 percent of global oil supply, will meet on March 17 in Vienna to review production targets. The organization’s commitment to record output cuts announced in late 2008 has flagged after a recovery in prices, which rose by 78 percent last year. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net

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