Oil stays above $77 as retail sales improve, analysts see higher prices as supplies decline

Oil prices rise on encouraging economic news

NEW YORK — Oil stayed above $77 a barrel Tuesday on improving retail sales data and forecasts of shrinking crude supplies.

Benchmark crude for October delivery rose 63 cents to $77.82 a barrel at midday on the New York Mercantile Exchange. The contract added 74 cents to settle at $77.19 on Monday.

Gas pump prices rose to a national average of $2.717 for a gallon of unleaded, according to AAA, Wright Express and Oil Price Information Service. That’s almost a penny higher than Monday and 3.5 cents above a week ago. Much of the rise came in the Midwest, where a pipeline supplying Canadian crude to Midwest refiners remains shut while a leak is repaired.

The average pump price in Illinois is about $2.94, up more than two cents from Monday. Indiana retail gas prices average around $2.84 a gallon. Michigan and Wisconsin drivers are paying about $2.82.

After a run-up from $72 a barrel at the end of August, crude has again slowed its advance, mainly on concerns about the strength of the global economy. While positive news on China’s economy has tended to push prices up, data from the U.S. and Europe has been a mixed bag, tending to keep a lid on price increases.

A report from Sucden Financial Research noted, “It seems that there is modest resistance in the $78-per-barrel area for the near term, but crude oil prices remain in the ‘healthy range’ of $73-$77 per barrel.”

On Tuesday the Commerce Department said retail sales rose 0.4 percent last month, the biggest gain since March. Meanwhile the EU’s statistics office, said industrial production in the eurozone was flat in July and a survey of German investor sentiment was much weaker than expected.

The head of the Organization of the Petroleum Exporting Countries suggested Tuesday in Vienna that oil production will probably stay unchanged for some time.

Abdalla El-Badri said OPEC was “comfortable” with the current range of oil prices and did not want to “rock the boat” as the world recovers from the global economic downturn.

While some analysts say low energy prices are crucial to an economic recovery, oil prices may not remain in the “comfortable” range for long.

“The tide will soon be turning in the U.S. oil market,” Goldman Sachs said in a report. “We expect a draw on U.S. inventories to begin in the coming weeks, which will likely serve as a catalyst for higher crude oil prices.”

Goldman said it expects crude to trade at $92 a barrel in three months, $91 in six months and $101 in a year.

The Energy Department’s Energy Information Administration weekly report on crude supplies — the market benchmark — will be released Wednesday. Data for the week ending Sept. 10 is expected to show a drop of 2.25 million barrels in crude oil stocks and of 400,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

Natural gas prices could get some support in the days and weeks ahead. Once again, the weather has a lot to do with it.

“Weather forecasts have been revised much warmer in the six-to-10 day period for both the Midwest and the Mid-Atlantic regions of the country and slightly warmer across much of the eastern half of the country in the 11-to-15 day period, which could provide some support for gas prices in the latter part of this month,” said Addison Armstrong, senior director of market research at Tradition Energy.

Extending the cooling season could increase demand for natural gas as more power plants that supply electricity use less expensive, cleaner-burning gas.

Natural gas lost 8.2 cents at $3.857 per 1,000 cubic feet on the Nymex.

In other energy trading heating oil rose 2.75 cents to $2.1502 a gallon and gasoline gained 1.46 cents at $1.9952 a gallon.

In London, Brent crude added 71 cents at $79.74 a barrel on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Hungary, Alex Kennedy in Singapore and Veronika Oleksyn in Vienna contributed to this report.