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April 7 (Bloomberg) -- Crude oil futures rose the most in two months after inventories in the world's largest energy consumer unexpectedly fell from a 19-week high last week.

Supplies declined 2.1 million barrels to 292.2 million in the week ended April 2, the U.S. Energy Department reported. Analysts surveyed by Bloomberg expected an increase of 2 million barrels. Inventories of gasoline and distillate, which includes diesel and heating oil, also fell. Refineries operated at 89.9 percent of capacity, the highest in eight weeks.

``The good draws in both crude oil and gasoline came as a shock,'' said Justin Fohsz, a broker with Starsupply Petroleum Inc. in Englewood, New Jersey.

Crude oil for May delivery was up $1.36, or 3.9 percent, at $36.33 a barrel at 12:11 p.m. on the New York Mercantile Exchange. Futures are set for the biggest single-session rise since Feb. 2. Oil rose 1.7 percent yesterday on concern that violence in Iraq may limit exports from the country.

Prices were up 30 percent from a year earlier when U.S. forces were attacking targets in Baghdad.

In London, the May Brent crude-oil futures contract was up $1.17, or 3.7 percent, at $32.52 a barrel on the International Petroleum Exchange.

The Energy Department released its weekly report on petroleum inventories at 10:30 a.m. Washington time. Crude-oil stockpiles in the week ended March 26 were the highest since August 2002.

Rising Refinery Activity

The biggest increase in refining operations was along the coast of the Gulf of Mexico, where refiner inputs rose by 1.7 percent to 7.3 million barrels of crude oil a day. The region is the location of nearly half of U.S. refining capacity. Refiners boost operations during the spring to meet peak gasoline demand during the summer driving season.

U.S. imports averaged 9.8 million barrels a day, a 3.2 percent decline from the week before.

``Crude-oil supplies fell as refiners, especially along the Gulf of Mexico, increased output,'' said James Ritterbusch, a senior energy analyst for Prudential Global Derivatives in Galena, Illinois. ``Gasoline demand is incredibly strong.''

Gasoline inventories fell 800,000 barrels last week to 200.1 million barrels, 1 percent lower than a year earlier. Analysts surveyed by Bloomberg expected an increase of 1 million barrels. Demand jumped 5.9 percent to 9.2 million barrels a day, the highest since the week ended Oct. 31. Gasoline use was 9.4 percent higher than during the same period a year earlier.

Gasoline for May delivery was up 4.36 cents, or 4.1 percent, at $1.117 a gallon in New York. Futures were 33 percent higher than a year earlier.

Distillate reserves fell by a larger-than-expected 4.5 million barrels to 105.2 million, the lowest since May. Analysts expected a decline of 860,000 barrels.

Iraqi Supply

Iraq, which has the world's second-biggest proved crude-oil reserves, invited refiners to buy 6 million barrels of Kirkuk- grade crude oil stored at Ceyhan, the second such sale since the pipeline to the Turkish port began operation in February.

Bidders must express their interest by April 15, and winners will load their oil in cargoes of 1 million or 2 million barrels between April 19 and April 26, the State Oil Marketing Organization said in a statement received by fax.

Iraq is the only member of the Organization of Petroleum Exporting Countries without a production quota. OPEC agreed at a meeting last week to reduce crude-oil production targets by 1 million barrels a day to 23.5 million barrels a day, starting this month.

``We shouldn't expect huge increases in production but the Iraqis have been steadily increasing exports,'' said Aaron Brady, an analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Down the line this will put more pressure on Saudi Arabia and the other OPEC countries.''

To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.

To contact the editor of this story:
Robert Dieterich at rdieterich@bloomberg.net.

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