Crude oil prices responded to encouraging economic news and climbed higher on Tuesday.
Benchmark oil recovered from early losses to rise 14 cents to $88.75 a barrel in midday trading on the New York Mercantile Exchange.
Meanwhile, the national average for unleaded gasoline hovered around $2.98 a gallon on Tuesday, according to AAA, Wright Express and the Oil Price Information Service. That’s up about 2 cents higher than a week ago and nearly 38 cents more than a year ago. Some analysts think the national average may reach $3 a gallon by Christmas, although drivers in some areas pay more than that already.
The economic news on Tuesday pointed to improving demand for oil and gas in the coming months. The Commerce Department said retail sales rose for a fifth straight month in November. A Business Roundtable survey found 45 percent of executives polled expect their companies to add more workers and spend more in the next six months. And the Labor Department said wholesale prices rose in November.
While the economic data was positive, energy traders are still concerned about inflation and want more clarity on what the government will do to keep the economic recovery going, according to PFGBest analyst Phil Flynn.
The Fed holds its last scheduled meeting of the year on Tuesday. While no major policy announcements are expected, Fed policymakers will likely take a look at the effectiveness of the $600 billion bond-buying program they put in place and the effect of tax cut extensions pending in Congress. The Fed’s decision to buy government bonds was intended to encourage Americans to spend more which, in turn, would boost the economy. Since the program was announced in early November, oil prices have risen an average of 4.6 percent and last week hit a two-year high of $90 a barrel.
Some analysts expect oil to reach $90 a barrel again before year-end and push toward $100 a barrel by next spring as the peak summer driving season approaches.
The wintry weather that blasted the Midwest and the Northeast in the past few days is helping to keep oil prices in check for now, according to Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. He said the bad weather kept drivers off the roads and slowed demand for gasoline.
In other trading on the Nymex, heating oil added 1.03 cents at $2.4755 a gallon. Gasoline lost 0.04 cent at $2.3180 a gallon. Natural gas fell 14.2 cents to $4.278 per 1,000 cubic feet.
In London, Brent crude rose 40 cents to $91.59 per barrel on the ICWE Futures exchange.