By Myra P. Saefong and Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude futures closed above $99 a barrel Tuesday, buoyed by better-than-expected U.S. data on retail sales and manufacturing, but a stronger dollar and renewed worries about Europe’s debt outlook helped keep a lid on price gains.
Crude for December delivery CL1Z -0.14% rose $1.23, or 1.3%, to settle up to $99.37 a barrel on the New York Mercantile Exchange. That was the highest closing level for a most active contract since July 26, according to data from FactSet Research.
Prices extended their gains into the electronic trading session after an industry report showed a surprise climb in last week’s crude inventories, but posted a larger-than-expected drop in gasoline supplies.
“Retail sales were good, which would tend to suggest that demand for gasoline is going to get a little bit better,” said Phil Flynn, a vice president at PFG Best.
U.S. retail sales for October showed stronger-than-expected growth, as consumers opened their wallets for everything from building materials to electronics. Read more on retail sales.
Also a report on November manufacturing in the New York region, called the Empire State manufacturing index, showed its first positive reading in five months. Read more on Empire State index.
“The report suggests that current manufacturing conditions are improving and will likely be supported by inventory rebuilding in the months ahead,” said Troy Davig, an economist with Barclays Capital. Even more encouraging, he added, was the improvement in expectations.
Resistance at $100
Despite all that, oil continues to hit resistance as it approaches the $100 level.
“Psychologically, if you look at the charts, there is going to be a lot of resistance for [West Texas Intermediate crude] near $100,” commented Flynn. “I think we could get to $104, but I don’t expect it to stay there.”
Indeed, for now, traders are “skittish to put in buy orders” as WTI approaches $100, said Seth Rabinowitz, a partner at management consulting firm Silicon Associates.
“The dominant depressing force in the oil market is still uncertainty in the European debt market, despite recent positive developments” with Silvio Berlusconi ceding power in Italy and Greece “being mostly in the rearview mirror.”
“Pessimism about European demand for oil is also running rampant with production numbers ... that look quite grim,” Rabinowitz added. Oil’s “courting the $100 price tag, and it’s just not ready to accept its date proposal. All traders are wide-eyed on Europe, which has multiple, obvious fundamental problems.”
Against this backdrop, prices for other energy futures finished mixed.
Gasoline for December delivery RB1Z +0.17% climbed 5 cents, or 2%, to $2.59 a gallon, and December heating oil HO1Z +0.17% added 1 cent, or 0.3%, to $3.17 a gallon, but December natural gas NG11Z +0.09% closed at $3.40 per million British thermal units, down 5 cents, or 1.6%.
Oil had spent much of the Asia and European session in the red, adding to the prior session’s losses, as concerns about Europe’s debt crisis and the threat to the global economy resurfaced, driving investors out of riskier assets.
December Nymex crude had dropped 0.9% during the U.S. session Monday. See report on Monday’s moves for oil.
The earlier falls for oil came as a rise in Spanish and Italian bond yields triggered fresh concerns that Europe’s debt problems were deepening, prompting selling across equity and commodity markets.
For oil, “demand concerns are always an issue — that’s par for the course,” said Rabinowitz. “What’s not par for the course are [debt] defaults. Once traders are calmed regarding stability concerns, oil will be above $100 again.”
A stronger dollar also has weighed on crude, with the dollar index DXY +0.53% , which compares the U.S. unit with a basket of six rival currencies, rose to 77.893 from 77.488 in North American trade late Monday.
A higher greenback tends to discourage buying in dollar-priced commodities such as oil, as it makes them less affordable to holders of other currencies.