Oil climbed above $99 per barrel Tuesday following a better-than-expected retail sales report, a decline in the dollar and a broad rally on Wall Street.
The government reported that retail sales slipped 0.2 percent last month, the first decline in nearly a year. Lower cars sales brought down the reading. The report still beat analysts' expectations. Excluding car sales, retail sales rose 0.3 percent. The Labor Department also added some upbeat news, saying that food costs were falling.
Stocks and oil rallied after the reports came out. Benchmark West Texas Intermediate crude for July delivery gained $2.07, or 2.1 percent, to settle at $99.37 per barrel, rebounding from Monday's decline on the New York Mercantile Exchange.
In London, Brent crude added 93 cents to settle at $119.35 per barrel on the ICE Futures exchange.
The Dow Jones Industrial Average, the Standard and Poor's 500 and the Nasdaq were more than 1 percent higher, the best gain for stocks in two weeks.
Oil rose against a weaker dollar. Oil is priced in U.S. currency and tends to rise as the greenback falls and makes crude cheaper for investors holding foreign currency.
Analyst and trader Stephen Schork noted that despite waning demand in the U.S., oil continues to look like a relatively safe investment when compared with the dollar. The world still needs fuel, and supplies are expected to get tighter this year as China and other emerging nations consume more. "There's some momentum there," Schork said. And crude prices will continue to be supported by production problems in the North Sea, a shutdown in Libyan exports and supply issues in Nigeria.
Goldman Sachs said Tuesday that "it is only a matter of time" before excess production from Saudi Arabia and other OPEC countries will become "effectively exhausted." That means the market will need "higher oil prices to restrain demand, keeping it in line with available supplies," Goldman analyst David Greely said.
In the U.S. motorists have cut back on gasoline purchases for 12 weeks in a row, according to the latest survey by MasterCard SpendingPulse. SpendingPulse, which tracks purchases at thousands of pumps around the country, estimated that Americans bought 389.8 million gallons per day of gasoline last week. That's down 1 percent from the same week a year ago.
Gasoline pump prices dropped to $3.696 per gallon on Tuesday, according to AAA, Wright Express and Oil Price Information Service. The national average is 26.5 cents cheaper per gallon than it was a month ago, but it's still almost a dollar more than a year ago. Analysts expect the national average to fall as low as $3.50 per gallon this month.
In other Nymex trading for July contracts, heating oil added 2 cents to settle at $3.1258 per gallon, while gasoline futures gained 6.78 cents to settle at $3.0646 per gallon. Natural gas lost 6.5 cents to settle at $4.581 per 1,000 cubic feet.
Chris Kahn can be reached at http://www.twitter.com/ChrisKahnAP