Oil Rises as U.S. Retail Sales Beat Forecasts

Crude snapped a two-day decline in New York on better-than-expected economic reports from the U.S. and Germany.

Prices climbed 0.8 percent after the Commerce Department said U.S. retail sales increased for the first time in four months. The German economy slowed less than forecast in the second quarter, the Federal Statistics Office in Wiesbaden said.

“The decent retail sales number is another signal that U.S. economic growth is a little bit better,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “At this point, oil investors are looking for any sort of positive news.”

Oil for September delivery advanced 70 cents, or 0.8 percent, to settle at $93.43 a barrel on the New York Mercantile Exchange. Prices are up 20 percent from this year’s settlement low of $77.69 on June 28.

Prices reduced gains after the American Petroleum Institute reported oil inventories increased 2.78 million barrels to 367.1 million last week. The September contract rose 55 cents, or 0.6 percent, to $93.28 a barrel at 4:31 p.m. in electronic trading. The contract was at $93.42 before the API report was released at 4:30 p.m. in Washington.

Brent crude for September settlement, which expires Aug. 16, gained 43 cents, or 0.4 percent, to end the session at $114.03 a barrel on the London-based ICE Futures Europe exchange, the highest level since May 3.

The October contract increased 43 cents, or 0.4 percent, to $112.15 a barrel. The European benchmark’s premium to West Texas Intermediate, based on September prices, narrowed to $20.60 from yesterday’s $20.87, the widest gap since April.

Consumer Purchases

Retail sales increased 0.8 percent last month, more than the 0.3 percent estimate by economists polled by Bloomberg. The pickup in July retail sales followed a quarter in which household spending grew at the slowest pace in a year. Consumer purchases, about 70 percent of the economy, expanded at a 1.5 percent annual rate from April to June, according to Commerce Department data.

“Retail is always an important economic barometer and traders hinge on these numbers on a daily basis,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “It’s important for today’s price action. Everybody is kind of watching the economic data now.”

European Economy

Germany’s gross domestic product rose 0.3 percent from the first quarter. Economists predicted a 0.2 percent advance. Second-quarter expansion was driven by consumption and net trade, with exports rising more than imports, the statistics office said.

French GDP was unchanged in the quarter, better than the 0.1 percent decline economists had predicted.

The economic data eased concern that weaker growth will reduce demand for oil. The U.S. and European Union accounted for 37 percent of global demand in 2011, according to BP Plc’s Statistical Review of World Energy, released in June.

Crude also rose with equities and commodities and on speculation that U.S inventories fell last week. The Standard & Poor’s 500 Index increased as much as 0.4 percent. It erased its gain after Nymex floor trading closed. The S&P’s GSCI Index of 24 commodities rose 0.3 percent.

Crude stockpiles probably declined 1.5 million barrels, or 0.4 percent, to 368.4 million barrels last week, according to the median response in a Bloomberg survey before an Energy Department report tomorrow.

Gasoline supplies probably slid 2 million barrels, or 1 percent, to 204.1 million in the week ended Aug. 10, the survey showed.

Oil also gained on concern that escalating tension in the Middle East will disrupt supplies from a region responsible for about one-third of world production. Prices have climbed 6.1 percent this month.

Israel, Iran

Israeli opposition to a military strike aimed at halting Iran’s nuclear program is declining as Prime Minister Benjamin Netanyahu stepped up warnings that the country faces a potential threat to its existence. Iran supplied 2.8 million barrels a day of oil in July, according to the Energy Department.

Some 46 percent of Israelis oppose a strike on Iran without U.S. support, according to a poll by the Dialog Institute reported on Channel 10 on Aug. 12. That compares with 58 percent opposed to such a move in a survey by Dialog published March 8 in the Haaretz newspaper.

“The Middle East tension is the main reason why oil has been rising,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “Economic data were a little better than expectation but it’s Iran that’s pushing oil higher.”

Electronic trading volume on the Nymex was 415,539 contracts as of 4:33 p.m. in New York. Volume totaled 579,642 contracts yesterday, 5.5 percent above the three-month average. Open interest was 1.46 million.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE