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 [email protected]
--Jeffrey Sparshott, Sarah Portlock, Julian E. Barnes and Margaret Coker contributed to this report.