Oil futures made a run at $100 a barrel Tuesday on a combination of encouraging economic data and expectations that the supply picture is tightening. They came within 16 cents of the psychologically important benchmark before falling back.
Light, sweet crude for December delivery ended the day up $1.23, or 1.25%, at $99.37 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange was up 51 cents, or 0.5%, at $112.40.
Futures climbed as a host of new data gave traders reason to believe the U.S. economic recovery is on track, and strong economic activity is bullish for oil prices. The Commerce Department said October retail sales rose by 0.5% last month from September, more than economists predicted. Meanwhile, the Labor Department said wholesale prices dropped, indicating mild inflation, and the New York Fed's Empire State Manufacturing Survey showed an expansion for the first time since May.
Meanwhile, analysts and traders have been watching a tightening picture for supply-and-demand fundamentals in the U.S., and expect supplies to drop further when the U.S. Energy Information Administration reports weekly inventories on Wednesday. Oil inventories are expected to drop by 800,000 barrels, according to a consensus estimate of analysts surveyed by Dow Jones Newswires.
"A few months ago, people were thinking of and pricing oil in terms of the U.S. being in a recession, and I think that's past now," said Kurt Kinker, the chief market analyst for brokerage Mirus Futures. "We've seen a lot of recovery."
Though triple-digit oil will grab attention from consumers and politicians, it is not much different in incremental terms from where oil has been since it broke past $90 at the start of the month. Though it may impact the price consumers pay for everything from gasoline to shipped goods to plane tickets, prices for those things have already been on the rise during oil's run up from $75 a barrel to its present level since the start of October.
"From a fundamental perspective, when prices go up it means the commodity is more expensive," said Tim Evans, an analyst with Citi Futures Perspective. "There is no compelling information contained in whether the first number in the oil price is a nine or a one. This is numerology."
Front-month December reformulated gasoline blendstock, or RBOB, settled up 5.04 cents, or 2%, to $2.5857 a gallon. December heating oil traded up 0.91 cent, or 0.3%, to $3.1713 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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