By John M. Biers
NEW YORK--Overriding some bearish new data on U.S. retail sales
and weak overall Chinese sentiment, oil prices Monday closed 1.5%
higher in anticipation of U.S Federal Reserve Chairman Ben Bernanke
on Tuesday possibly indicating a greater willingness to take action
to stimulate the economy.
Light, sweet crude for August delivery settled at $88.43 a
barrel on the New York Mercantile Exchange, up $1.33. Brent crude
on the ICE futures exchange settled at $103.55 a barrel, up
$1.15.
"Expectations and hopes are building that we're going to see
some intervention," said Matt Smith, analyst at Summit Energy, who
predicts the market will be disappointed by Mr. Bernanke's remarks
Tuesday.
Markets have been buzzing in recent weeks with the prospect that
the U.S. Federal Reserve may engage in another round of
quantitative easing, whereby it buys bonds with an eye toward
lowering long-term interest rates in order to stimulate the
economy. Past rounds of quantitative easing have boosted oil
prices, which are traded in dollars. A weaker dollar following
quantitative easing attracts buyers to the oil market because the
commodity becomes less costly to other currencies.
Mr. Bernanke is scheduled to appear before congressional panels
on Tuesday and Wednesday.
The appearances come after the latest bit of weak news on the
direction of the overall economy, which has seen poor jobs and
consumer sentiment data in recent weeks.
U.S. retail sales fell for the third consecutive month in June,
signaling slower economic growth as consumers rein in spending.
Retail and food service sales decreased 0.5% last month to a
seasonally adjusted $401.52 billion, the Commerce Department
reported Monday. That is the first time since the depths of the
recession in 2008 that retail sales have fallen three months in a
row.
Economists surveyed by Dow Jones Newswires had forecast a 0.2%
rise.
Analysts said China bears continued watching after Chinese
Premier Wen Jiabao over the weekend warned that economic weakness
would persist for a while longer. As the world's second-largest
consumer of oil after the U.S., China has been a major driver of
world oil markets in recent years.
News of the China slowdown "would put more downward pressure on
crude because that's the last place that's growing," said Tariq
Zahir, a managing member for Tyche Capital Advisors.
Oil prices Monday rallied initially on reports that the U.S. had
fired at a ship off the coast of the United Arab Emirates on
speculation that the incident was spurred by lingering tensions
between the West and Iran over its nuclear program. One Indian
fisherman was killed and three other Indian nationals were
critically injured, said UAE deputy foreign affairs minister Tareq
Al Haidan.
A Navy spokesman defended the incident and said the vessel, a
fishing boat, did not respond to warnings. U.S. officials said the
boat involved in Monday's incident wasn't Iranian.
Front-month reformulated gasoline blendstock, or RBOB, settled
at $2.85 a gallon, up 3.8 cents. Front-month heating oil settled at
$2.83 a gallon, up 4 cents.
More information on settlements and highs and lows for futures
on Nymex and ICE platforms can be found by searching for the
following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-Write to John Biers at john.biers@dowjones.com
--Jeffrey Sparshott, Sarah Portlock, Julian E. Barnes and
Margaret Coker contributed to this report.