Crude Rises on Strong U.S. Retail Sales

Oil prices rallied Tuesday following strong U.S. retail sales figures and respectable economic results out of major European economies, news that reignited bullish sentiment among some market participants.

Nymex front-month oil futures settled up 70 cents, or 0.8%, at $93.43 a barrel. Brent futures settled at $114.03 a barrel, up 43 cents.

The increase came after reports that U.S. retail sales rose for the first time in four months in July, a sign consumers may start spending at a slightly faster pace despite concerns about the economy. Strong retail sales are a sign of economic growth that could spur demand.

Retail sales "helped the sentiment early on. Then it just sort of held," said Andy Lebow, senior vice president of energy futures at Jefferies Bache in New York.

Retail and food-service sales increased 0.8% last month to a seasonally adjusted $403.93 billion, the Commerce Department reported Tuesday. That was the biggest jump since February.

Economists surveyed by Dow Jones Newswires had forecast a 0.2% rise.

Also Tuesday, Germany's gross domestic product rose 0.3% on the quarter, compared with expectations of 0.2% growth. France reported flat growth for the third quarter in a row. A Bank of France business survey last week forecast a 0.1% GDP contraction in the third quarter.

The reports of strong retail sales and the results from France and Germany come on the heels of some other bullish signs in recent days for oil markets.

Renewed tensions between Iran and Israel and the burgeoning crisis in Syria have revived concerns about the security of oil supplies from the critical Middle East region. Also, a heavy maintenance schedule for North Sea oil fields has tightened supplies in that market.

"It still feels like a market capable of achieving new high territory, especially if the macro factor remains tilted upward," Jim Ritterbusch, head of oil-trading advisory Ritterbusch and Associates, said in a client note.

John Kilduff, a trader at Again Capital, said the market also is gearing up for a heavy draw when the report on U.S. oil inventories is released Wednesday. U.S. oil inventories have dropped by larger-than-expected amounts the last two weeks.

"I do think we're on our way to $100 a barrel in fairly short order," Mr. Kilduff said.

Carl Larry of Oil Outlooks and Opinions, a research and consulting firm, said better economic data would lead oil higher.

Oil "has to go over $100," Mr. Larry said. "There's nowhere else to go."

But Tariq Zahir, a managing member of Tyche Capital Advisors, said significantly higher oil prices could spur talk of an emergency stockpile release, given that it is a presidential election year in the U.S.

Front-month reformulated gasoline blendstock, or RBOB, settled at $3.00 a gallon, up 1.07 cents. Heating oil settled $3.04 a gallon, up 1.63 cents.

Copyright (c) 2013 Dow Jones & Company, Inc.

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