Oil rose after U.S. retail sales increased by the most in five months and equities gained, signaling economic growth and higher demand.
Prices advanced 0.4 percent as retail sales rose 1.1 percent in February, the Commerce Department said. The Dow Jones Industrial Average reached the highest level in four years. Oil pared gains as the dollar strengthened against the euro after the Federal Reserve raised its assessment of the economy and refrained from new actions to lower borrowing costs.
“Prices were higher as we had some positive economic data,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The Fed is saying that there will be no additional stimulus.”
Oil for April delivery rose 37 cents to settle at $106.71 a barrel on the New York Mercantile Exchange. The price ranged from $105.67 to $107.35. The futures are up 8 percent this year.
Prices were little changed after the American Petroleum Institute said oil supplies rose 2.78 million barrels to 349.3 million last week. Oil rose 34 cents to $106.68 a barrel at 4:37 p.m. in electronic trading.
Brent crude for April settlement on the London-based ICE Futures Europe exchange gained 88 cents, or 0.7 percent, to $126.22 a barrel, the highest settlement price in 11 months.
The retail sales increase matched the median forecast of 81 economists surveyed by Bloomberg News and followed a January gain of 0.6 percent that was larger than previously estimated. Sales rose 1.6 percent at automobile dealers, reversing a 1.6 percent decrease the prior month. Demand improved in 11 of 13 industry categories.
“Retail sales definitely are having a bullish impact on the market,” said Phil Streible, a Chicago-based commodities broker at RJO Futures.
Cars last month sold at the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. Light-vehicle sales accelerated to a 15 million annual rate, the strongest since February 2008, according to Ward’s Automotive Group.
The Standard & Poor’s 500 Index advanced for the fifth straight day, climbing 1.8 percent to 1,395.95 at 4 p.m. New York time. The index is up 11 percent in 2012. The Dow climbed 1.7 percent to 13,177.68.
Prices also gained after German investor confidence jumped to a 21-month high. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations advanced to 22.3 from 5.4 in February.
The index, which is designed to predict economic developments six months in advance, increased for the fourth straight month. It reached the highest reading since June 2010. Economists forecast a gain to 10, according to the median of 36 estimates in a Bloomberg News survey.
“The market pushed high on German confidence and retail sales, rekindling the rally to $110,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The economic data is boosting expectations for higher demand.”
Crude fell back as the dollar strengthened after the Fed released its statement at around 2:15 p.m.
Inflation “has been subdued in recent months although prices of crude oil and gasoline have increased lately,” the Federal Open Market Committee said in a statement at the conclusion of a meeting today in Washington. The increase in oil will “push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.”
The dollar increased its gain against the euro to 0.7 percent after the Fed’s statement from 0.4 percent before. The dollar strengthened as much as 0.8 percent in early trading, helping push oil down. A stronger dollar and weaker euro reduce oil’s appeal as an investment alternative.
“We are moving with the dollar and equities again,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
Crude prices are too high, three oil ministers said at the International Energy Forum yesterday in Kuwait. Mohamed Al-Hamli of the United Arab Emirates, Mohammed Al-Rumhy of Oman and Jose Maria Botelho de Vasconcelos of Angola all said prices should be lower. The Angolan minister said he’d prefer to see Brent at $110 to $115 a barrel.
U.S. gasoline inventories probably fell 1 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Distillate supplies, including diesel and heating oil, probably dropped 1.5 million barrels and crude stockpiles rose 1.6 million, the survey showed.
Electronic trading volume on the Nymex was 601,176 contracts as of 4:38 p.m. in New York. Volume totaled 525,361 contracts yesterday, 16 percent below the three-month average. Open interest was 1.58 million contracts.