Bright retail sales data pushes crude prices higher

Prices rise on expectation of higher demand for oil in coming months

Crude prices ended higher on Friday, 14 October at Nymex. Better than expected retail sales data for September and softer dollar boosted the crude price on expectation of higher demand for oil in coming months.

Light and sweet crude for November delivery rose $2.57 (3.1%) to $86.8 a barrel on the New York Mercantile Exchange on Friday. For the week, crude gained 4.6%. For the month of September, oil futures lost 11%, and for the quarter, crude incurred losses of 17%. It was the worst quarterly performance for crude in almost two years.



The Commerce Department in US reported on Friday, 14 October 2011 that higher purchases of autos, clothing and furniture in September fueled the biggest increase in U.S. retail sales in seven months. Retail sales rose a seasonally adjusted 1.1% last month. Market had expected an increase of 0.8%. The increase in retail sales was boosted by demand for autos, which bounced back after a weak August performance. Auto sales spiked 3.6% last month, the biggest increase in a year-and-a half, as carmakers sold nearly 1.1 million vehicles. Excluding the auto sector, sales rose 0.6%, but that was still higher than market expectations of a 0.4% increase.

Sales for August, which were originally reported as unchanged, were revised up to a 0.3% increase. July sales were also revised higher. The report detailed that consumers also spent heavily last month on clothing as children went back to school and stores switched over to fall and winter clothing. Apparel sales rose 1.3%, the largest increase in seven months. Sales of home furnishings were also strong, up 1.1%.

In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, ended lower by 0.3%.

In the weekly inventory report on Thursday, the Energy Information Administration reported an increase of 1.3 million barrels of crude for the week ended 7 October 2011. Market had expected a decline of 300,000 barrels. The EIA also reported gasoline stockpiles declined 4.1 million barrels, and supplies of distillates dropped 2.9 million barrels. Market had expected gasoline stocks to rise 100,000 barrels, and distillates stocks to decline 600,000 barrels.

In its latest monthly outlook report during the week, the EIA reduced slightly the pace of world oil demand growth in 2011. As per the report, world oil demand this year will rise by 1.5% to 88.4 million barrels a day, followed by a 1.6% rise to 89.84 million barrels a day in 2012. Global oil supply is expected to rise 1% this year, to 87.84 million barrels a day, and gain a further 1.8% in 2012, to 89.41 million barrels a day.

Earlier during the week, the Organization of the Petroleum Exporting Countries trimmed its 2011-2012 growth forecast for global oil demand. In a monthly report, OPEC cut the global demand growth forecast for this year by 180,000 barrels of oil a day. The cartel also warned it could cut the outlook again.

Among other energy products on Friday, November gasoline rose 7 cents, or 2.4%, to $2.82 a gallon. November heating oil advanced 8 cents, or 2.8%, to $3.06 a gallon. On the week, gasoline rose 6.4%, while heating oil added 7%.

November natural gas gained 17 cents to settle at $3.70 per million British thermal units. On the week, the commodity rose 6.3%.