Oil Price Above $101 On Rising Consumer Confidence
The price of oil climbed above $101 a barrel in light holiday trading on growing consumer confidence and prospects for stronger demand.
Benchmark crude rose $1.52 on Tuesday to $101.19 per barrel in New York. Brent crude rose $1.21 to $109.17 per barrel in London.
Prices have risen in the past week as encouraging U.S. economic news pointed to stronger future demand. A private survey released Tuesday showed consumer confidence this month surged to levels not seen since April and was near a post-recession peak. The New York-based Conference Board its Consumer Confidence Index rose almost 10 points from November, to 64.5. The increase was surprisingly strong, with most analysts expecting a reading of 59.
Higher confidence is in line with retail reports of a decent holiday shopping season. Retailers saw a surge of shopping the week before Christmas as consumers took advantage of better discounts. The National Retail Federation now expects a 3.8 percent increase in holiday sales, up from its original forecast of 2.8 percent made in September.
Consumer spending accounts for about 70 percent of the U.S. economy, so an uptick in spending could boost growth and demand for oil. Consumers have cut back in recent years because of uncertainty about the economy, fed by a weak jobs market and a stagnant housing market. Gasoline demand has been steadily declining since spring.
Tensions in the Middle East have also boosted oil prices. Sectarian violence in Iraq and a diplomatic standoff over Iran's nuclear ambitions have stoked worries about crude supplies in the region.
Iran is the world's fourth largest oil producer, according to the Energy Department, and Iraq ranks 12th. Disruptions of supplies from either source could lead to higher prices, although crude continues to flow from both countries. Much of the oil in both countries is sold to customers in Asia.
Average retail gasoline prices in the U.S. were unchanged from Monday at a national average of $3.23 per gallon.
In other energy trading on the Nymex, natural gas rose 2 cents to $3.093 per 1,000 cubic feet. Heating oil rose 3 cents to $2.9310 a gallon, and gasoline futures were up 2 cents at $2.6957 a gallon.