Nov. 15 (Bloomberg) -- Oil approached $100 a barrel in New York after U.S. retail sales rose more than forecast in October, bolstering optimism that the economy will expand this quarter.
Futures settled at a three-month high after the Commerce Department said sales rose 0.5 percent last month. A 0.3 percent gain was projected, according to the median of estimates in a Bloomberg News survey. The Energy Department will probably report tomorrow that U.S. oil and fuel supplies fell last week as demand surged, a Bloomberg News survey showed.
“We’ve been too focused on the downside risks and not enough on the upside,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “The fundamentals are bullish. U.S. inventories are falling and demand is increasing.”
Crude oil for December delivery rose $1.23, or 1.3 percent, to $99.37 a barrel on the New York Mercantile Exchange, the highest settlement since July 26. Futures reached an intraday high of $99.84.
Prices were little changed from the settlement after the industry-funded American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles rose 1.3 million barrels to 341.3 million last week. December oil was up $1.25, or 1.3 percent, to $99.39 a barrel in electronic trading at 4:33 p.m.
Brent Spread Narrows
Brent oil for December settlement increased 50 cents, or 0.4 percent, to end the session at $112.39 a barrel on the London-based ICE Futures Europe exchange. The contract expired today. The January contract climbed 90 cents, or 0.8 percent, to settle at $112.18.
Brent’s premium to West Texas Intermediate fell for a sixth day, narrowing to $13.02, the least since May 24. The spread is down 53 percent from a record high of $27.88 on Oct. 14.
Prices also gained as the Federal Reserve Bank of New York’s general economic index rose to 0.6, the first positive reading since May, from minus 8.5 in October. Readings higher than zero signal that the so-called Empire State Index is expanding. The bank covers New York, northern New Jersey, and southern Connecticut.
The producer price index declined a more-than-projected 0.3 percent after a 0.8 percent gain in September, Labor Department figures showed today in Washington.
“Oil got a nice bounce off of the retail number,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The Empire State Index and wholesale price data were also supportive. Any data showing low inflation allows the Fed more freedom to take action to support the economy.”
Futures fell earlier as Italy’s premier in waiting, Mario Monti, struggled to get political parties to help form his new cabinet. The euro area’s inability to contain its sovereign-debt crisis has led to a surge in Italian borrowing costs with yields on the country’s benchmark 10-year bonds climbing above 7 percent earlier today.
“If we avoid a meltdown in Europe, the stage is being set for a bull run,” Greely said. “If just Europe slips into recession but there’s no financial crisis with trade and the credit markets seizing up, the impact will be minimal.”
Hedge funds and other large speculators raised bullish bets on oil the most since May in the week ended Nov. 8, a Commodity Futures Trading Commission report showed yesterday. Wagers on rising prices increased 7.2 percent to 203,965 futures and options combined.
Moving Average, Options
Futures in New York have settled above the 200-day moving average since Nov. 7, forming technical support. Crossing the threshold was a signal for technical traders to purchase contracts. The 200-day average stood at $95.16 today.
The most actively traded oil option was the December $100 call, which gives investors the right to buy oil at that price. Those calls accounted for 14 percent of electronic trading before expiring out of the money today.
U.S. crude oil stockpiles probably decreased 1.2 million barrels in the week to Nov. 11, according to the median of 13 analyst estimates in a Bloomberg News survey. Supplies of distillate fuel, a category that includes diesel and heating oil, fell 2.35 million barrels, the survey showed. Gasoline inventories dropped 1 million barrels, according to the survey.
U.S. total fuel demand surged 7.5 percent to 20 million barrels a day in the week ended Nov. 4, the highest level in three months, according to the department.
Oil volume in electronic trading on the Nymex was 631,861 contracts as of 4:32 p.m. in New York. Volume totaled 710,085 contracts yesterday, 7.1 percent above the three-month average. Open interest was 1.38 million contracts.
--Editors: Richard Stubbe, Dan Stets
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