Crude oil rose, capping the biggest two-day rally since February, after European Central Bank President Jean-Claude Trichet announced a bond-purchase program to stimulate economic growth.

Futures advanced 3.7 percent as Trichet said at a press conference in Berlin that the ECB will resume covered-bond purchases and one-year loans for banks as the sovereign debt crisis threatens to spread. Oil dropped earlier as Trichet said that the euro-area economy faces “intensified downside risks.”

“The market was whipsawed on the Trichet statements,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We initially moved lower but then rebounded because the ECB will be adding more liquidity. Stimulus is bullish for both demand and the price.”

Crude oil for November delivery rose $2.91 to settle at $82.59 a barrel on the New York Mercantile Exchange. Futures have climbed 9.1 percent since Oct. 4, the biggest two-day gain since Feb. 22-23. Prices are down 10 percent this year.

Brent oil for November settlement increased $3, or 2.9 percent, to end the session at $105.73 a barrel on the London- based ICE Futures Europe exchange.

Crude began rising from a one-year low yesterday when the U.S. Energy Department reported U.S. stockpiles fell 4.68 million barrels to 336.3 million last week. Days of supply fell to 22.2, equaling the lowest level since 2008. Gasoline inventories declined 1.14 million barrels to 213.7 million.

Berlin Meeting

The ECB will spend 40 billion euros ($53.8 billion) on covered bonds from next month and offer banks two additional unlimited loans of 12- and 13-month durations, Trichet said.

“They are concerned about slowing growth and inflation, so they decided against cutting interest rates and went ahead with quantitative easing,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Trichet spoke as German Chancellor Angela Merkel held talks in Berlin with International Monetary Fund chief Christine Lagarde, World Bank President Robert Zoellick and Angel Gurria of the Organization for Economic Cooperation and Development, among others. Trichet is due to join the discussions later.

European Union officials are working on plans to increase bank capital, Antonio Borges, the IMF’s European department head, said yesterday in Brussels. Merkel said she’s ready to discuss recapitalizing banks at this month’s EU summit.

“There’s increasing optimism that the Europeans will find a way out of the debt crisis,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut.

Fed Signals

The Bank of England unexpectedly expanded its bond-purchase program to 275 billion pounds ($421 billion) from 200 billion pounds after keeping its key rate at a record low of 0.5 percent. Eleven of 32 economists in a Bloomberg News survey predicted an increase in asset purchases.

Federal Reserve Chairman Ben S. Bernanke signaled Oct. 4 that he’ll push forward with further expansion of monetary stimulus if needed. He said the Fed’s remaining tools to boost growth include giving more information about its pledge to keep interest rates low at least through mid-2013, reducing the rate paid on banks’ reserve deposits and buying more securities.

“If you see the Europeans solve some of their problems and if the U.S. skirts a recession, which we expect to be the case, you are setting up a tougher environment in the market,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “Volatility should increase.”

The Standard & Poor’s 500 Index rose 1.8 percent to 1,164.97 at 4:03 p.m. in New York and the Dow Jones Industrial Average increased 1.7 percent to 11,123.33. The dollar dropped 0.6 percent to $1.3427 per euro. A weaker dollar bolsters the appeal of commodities as an alternative investment.

U.S. Employment

Prices also climbed after claims for U.S. unemployment benefits rose less than forecast. Applications for jobless benefits increased by 6,000 to 401,000 last week, Labor Department figures showed. Economists projected 410,000 claims, according to the median estimate in a Bloomberg News survey. The monthly average dropped to the lowest level since August.

Employers added 59,000 workers to payrolls in September and the unemployment rate held at 9.1 percent, according to the median forecast of economists before the Labor Department’s monthly jobs report Friday.

“Tomorrow’s monthly jobs number is going to have a serious impact on the market,” Beutel said.

U.S. consumer confidence last week capped the worst quarterly performance in more than two years, when the country was in a recession. The Bloomberg Consumer Comfort Index rose to minus 50.2, from the prior period’s minus 53 that was the second-lowest level on record. The gauge averaged minus 48.4 last quarter, the weakest since the first three months of 2009.

“Since economic growth concerns remain and the data is mixed there will continue to be a great deal of volatility in the market,” said Jason Schenker, the president of Prestige Economics, an energy advisory company in Austin, Texas.

Oil volume in electronic trading on the Nymex was 700,572 contracts as of 3:15 p.m. in New York. Volume totaled 648,839 contracts yesterday. Open interest was 1.43 million contracts.