Crude oil rose to the highest level in more than two months as data showed a drop in inventories at a key U.S. delivery point and as U.S. equities rose after Caterpillar Inc. earnings beat estimates.

Oil climbed 4.4 percent as satellite images showed oil stockpiles in Cushing, Oklahoma, dropped 2.6 percent on Oct. 21 from Oct. 18, narrowing London-traded Brent oil’s premium to New York’s West Texas Intermediate to a 12-week low. Stocks climbed to a two-month high. Oil also gained on reports that China’s manufacturing may expand and that Japan’s exports exceeded economists’ forecasts.

“What you are seeing is a real recovery in WTI and a narrowing of the spread with Brent as people are playing off the Cushing inventory,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The good earnings reports are making people very bullish on the economy.”

Crude for December delivery rose $3.87 to $91.27 a barrel on the New York Mercantile Exchange, the highest settlement price since Aug. 3.

Brent oil for December settlement increased $1.89, or 1.7 percent, to settle at $111.45 a barrel on the London-based ICE Futures Europe exchange.

The spread between West Texas Intermediate oil traded on the Nymex and Brent narrowed to $20.18, the smallest since July 28. The spread was at a record high of $27.88 on Oct. 14.

Fundamentals ‘More Bullish’

“The fundamentals in the U.S., at least the inventory numbers, have been quite a bit more bullish recently,” said Kyle Cooper, director of research for IAF Advisors in Houston. “Cushing inventories are no longer bulging, so it makes sense that we are starting to see WTI come more into line with other grades.”

Oil stockpiles in Cushing dropped 760,000 barrels to 28.1 million, satellite images taken by the Longmont, Colorado-based DigitalGlobe Inc. show.

The Energy Department said last week that Cushing inventories, including floating and fixed tanks, totaled 31.1 million barrels as of Oct. 14, down 26 percent from a peak of 41.9 million on April 8. Inventories gained the past two weeks after 10 consecutive declines.

Cushing is the physical delivery point for New York oil futures contracts and the largest crude-trading and storage hub in the U.S.

“The inventory glut has diminished and that’s why the spread re-ordered itself,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Equities Gain

The Standard & Poor’s 500 Index advanced 1.2 percent to 1,253.71, the highest level since August. The Dow Jones Industrial Average rose 1 percent to 11,924.97. The S&P’s GSCI Index of 24 raw materials increased 2.5 percent to 646.18.

Caterpillar, the world’s largest maker of construction and mining equipment, said full-year sales will be at the top end of a previously forecast range of $56 billion to $58 billion.

U.S. gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate in the third quarter after advancing 1.3 percent in the previous three months, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department’s Oct. 27 release.

Orders for business equipment increased in September and new-home sales stabilized, other data may show this week.

China, Japan

China’s manufacturing may expand this month for the first time since June, snapping the longest contraction since 2009, according to a preliminary index of purchasing managers by HSBC Holdings Plc and Markit Economics released today.

The reading of 51.1 for the index was the highest in five months and compares with the final reading of 49.9 for September and August. A reading above 50 indicates expansion.

Japanese exports rose 2.4 percent in September from a year earlier as demand for cars and auto parts increased, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg was a 1 percent increase.

China is the second-largest consumer of oil, trailing the U.S., and Japan is third.

“As long as China and Japan are growing, they are going to buy an increasing amount of crude oil from the rest of the world, and that’s good for the oil market,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.

European Summit

European leaders held their 13th crisis summit in 21 months yesterday, debating how to cut Greece’s debt burden, boost the firepower of the region’s bailout fund and bolster banks ahead of a further meeting on Oct. 26.

“If Europe doesn’t come up with anything, this is going to get ugly, and that’s what’s driving the boat right now,” said O’Grady.

Hedge funds boosted bullish bets on oil by the most in five weeks in the week ended Oct. 18.

Net-long positions, or wagers on rising prices, in U.S. oil held by managed money, including hedge funds, commodity pools and commodity-trading advisers, in futures and options combined expanded by 13,685 futures equivalents, or 8.7 percent, to 171,378, the biggest gain since Sept. 13, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 21.

Oil volume in electronic trading on the Nymex was 1.06 million contracts as of 2:44 p.m. in New York. Volume totaled 499,932 contracts on Oct. 21, 26 percent below the three-month average. Open interest was 1.39 million contracts.