Oil rebounded after the biggest loss in two months

Oil rebounded after the biggest loss in two months as U.S. service industries expanded at a better- than-expected pace in January, signaling growth in 90 percent of the U.S. economy and stronger demand for crude.

Oil advanced as much as 0.9 percent as the Institute for Supply Management’s index of U.S. non-manufacturing businesses reached 55.2, beating the estimate of economists. European services output also shrank less than initially estimated last month. The U.S. and Europe together account for more than a third of global oil consumption.

Services in the U.S. expanded at about the same pace in January as in December, when the index reached a 10-month high of 55.7, the Tempe, Arizona-based ISM reported. Services are poised to benefit as manufacturing emerges from a slump in the second half of 2012. The ISM’s factory gauge reached a nine- month high of 53.1 in January, the group said last week.

Readings above 50 indicate expansion and those below 50 indicate contraction.

In Europe, the service index rose to 48.6 in January, above an initial estimate of 48.3, according to London-based Markit Economics. The gauge has shown a contraction for 12 months.

West Texas Intermediate crude for March delivery to $97.06 a barrel on the New York Mercantile Exchange. Prices dropped the most since Dec. 6 yesterday. Prices have gained 5.3 percent this year.

Brent oil for March settlement climbed $1.16, or 1 percent, to $116.76 on the London-based ICE Futures Europe exchange.