Oil Up on Economic Data Despite EU Contagion Worry

Oil prices rose Tuesday on supportive data that pointed to continued economic growth in the fourth quarter, sending U.S. crude to a 16-week peak and offsetting concerns that the euro zone debt crisis will keep spreading.

Trading was choppy and Brent's December crude contract and U.S. December crude options expired, contributing to oil's price volatility, brokers and analysts said.

U.S. retail sales rose and wholesale prices fell in October and a gauge of New York state manufacturing showed growth in November, bolstering hopes for a stronger fourth-quarter economy.

Data showing the German and French economies managed to expand in the third quarter added support.

``The U.S. data helped, especially the retail sales, the Germany and France growth wasn't so bad and the expiration of December Brent and U.S. crude options will add to the volatility even as everyone worries about Europe's debt problems,'' said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Oil's strength came despite a stronger dollar index, measuring the greenback against a basket of currencies. A stronger dollar can pressure dollar-denominated commodities.

The euro fell against the dollar and hit a five-week low against the yen.

Evidence of contagion came as Italian government bond yields again topped 7 percent, a financing level seen as unsustainable.

U.S. stocks were higher, but also in choppy trading, led by gains in technology shares after concern about Europe had seemed to offset the cheery economic data.

Expiring ICE Brent December crude rose 50 cents to settle at $112.39 a barrel. The day's $111.62 low neared Brent's $111.43 100-day moving average and the $113.14 intraday peak was just above the 200-day moving average of $113.09.

Brent January crude settled at $112.18, up 90 cents.

U.S. December crude rose $1.23 to settle at $99.37 a barrel, the highest close since July 26, after hitting a high at $99.84.

U.S. crude again neared 70 on the relative strength index on 14-day moving basis, a level that indicates it has been overbought and could be due for a correction lower.

Brent's premium to U.S. crude narrowed to $12.57 a barrel intraday, the lowest since hitting $12.44 on June 27 as the spread continued its retreat from the $19.91 intraday peak reached on Nov. 8.

ICE Brent experienced one of the quietest expiries of its front contract in months, reflecting a better supplied prompt oil market in Europe as Libyan and West African crude oil flowed into the region, traders said.

After being unable to reach consensus on a production targets at its June meeting, OPEC is scheduled to meet again Dec. 14.

Iran's OPEC Governor Mohammad Ali Khatibi told Reuters that it was pressure from officials of consumer countries to increase production that led to the lack of consensus at the June meeting.


U.S. crude oil and refined products stockpiles were expected to have fallen last week, a survey of Reuters analysts showed.

Crude stocks were expected to be down 1.2 million barrels and distillate inventories were expected to be down 2.1 million barrels.

Gasoline stocks were estimated to be down 700,000 barrels.

U.S. retail gasoline demand remained sharply lower versus the year-ago period last week as pump prices stayed well above the 2010 period, MasterCard said in a weekly report.

Investors awaited fresh snapshots of U.S. oil inventories, starting with a report from the American Petroleum Institute on Tuesday at 4:30 p.m. EST (2130 GMT). The U.S. Energy Information Administration's report is due on Wednesday at 10:30 a.m. EST.