By Grant Smith and Ben Sharples Jan. 5 (Bloomberg) -- Crude oil traded near a 14-month high in New York as freezing weather in the U.S. and signs of economic revival around the world bolstered the outlook for fuel demand. Oil held above $81 a barrel before a U.S. government report due tomorrow that may show supplies of distillate fuels such as heating oil fell as cold weather hit the country’s northeast. China’s manufacturing expanded at the fastest pace in more than five years, a report showed yesterday. “Fundamentals are more and more encouraging,” said Tobias Merath, head of commodities research at Credit Suisse Group AG in Zurich. “We have had some positive surprises in economic data and colder weather reaching into the U.S. Distillate inventories are the key to a sustainable uptrend.” Crude oil for February delivery was at $81.87 a barrel, up 36 cents, in electronic trading on the New York Mercantile Exchange at 9:48 a.m. London time. Yesterday, the contract rose 2.7 percent to $81.51 a barrel, the highest settlement since Oct. 9, 2008. U.S. distillate fuel inventories probably fell for a fourth week, according to a Bloomberg News survey before an Energy Department report tomorrow. Stockpiles including heating oil and diesel dropped 1.78 million barrels last week, based on the median estimate from 10 analysts polled. The Climate Prediction Center of the National Weather Service forecast below-normal temperatures from Texas to Maine through Jan. 17. The Northeast consumes about four-fifths of the country’s heating oil. Business Indexes Rise The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose to 50.5 in December from 48.7 in November, a Bloomberg News survey showed before tomorrow’s report. Yesterday, the Tempe, Arizona-based group said its factory index, representing U.S. manufacturing, climbed to 55.9 in December, the highest level since April 2006. Readings greater than 50 signal expansion. A Chinese purchasing managers’ index released yesterday by HSBC Holdings Plc and Markit Economics rose to a seasonally adjusted 56.1 from 55.7 in November. “Oil really got a boost from a string of upbeat manufacturing readings from the U.S., China and India,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “It has been a cold winter across a lot of the Northern Hemisphere, which has boosted demand for heating fuels and is expected to draw down the ample distillate stockpiles.” Brent crude oil for February settlement was at $80.76 a barrel, up 41 cents, on the London-based ICE Futures Europe exchange at 9:38 a.m. London time. Yesterday, the contract gained 2.8 percent to $80.12 a barrel, the highest settlement since Oct. 9, 2008. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

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