Oil rises toward $80

 

Oil rose towards $80 a barrel on Tuesday, following U.S. equities higher on optimism the economy is recovering.

Oil prices rose after three days of declines as investors were encouraged by strong corporate earnings that boosted equities prices, and on expectations of further drawdowns in U.S. fuel inventories.

"Oil is up as the stock market moves higher and people also expect inventory data to show more big drops in product stocks" said Phil Flynn, analyst at PFG Best Research in Chicago.

U.S. crude for December delivery rose 50 cents to $79.18 a barrel by 12:32 p.m. EDT (4:32 p.m. British time), after falling earlier in the day.

London Brent crude was up 34 cents at $77.60.

Oil prices have been taking cues from U.S. stock markets as investors gauge a recovery in the U.S. economy by the strength of third-quarter corporate earnings.

The Dow Jones industrial average and S&P 500 stock index both rose, led by oil companies, after BP reported better-than-expected quarterly results

Data showed U.S. house prices rose for a fourth straight month. 

A Federal Reserve official said the United States, the largest world oil consumer, has begun to recover from economic crisis.

Much of the United States is in the "early stages" of a recovery, Boston Fed President Eric Rosengren said Tuesday.

A stronger economy may lift fuel demand at a time when refiners have been operating at lower than normal rates. U.S. fuel stocks likely fell further last week, according to the average forecast of eight analysts polled by Reuters ahead of the government's weekly inventory report Wednesday.

Distillates, including diesel and heating oil, probably fell 900,000 last week amid colder-than-normal temperatures, according to the average forecast. Gasoline stocks probably fell by 300,000 barrels, adding to sharp drawdowns in recent weeks. Crude stocks probably rose 1.4 million barrels, according to the average Reuters poll estimate.

Ahead of that report, the American Petroleum Institute will release its weekly inventory data later Tuesday.

Oil rose on Tuesday in spite of a strengthening U.S. dollar, which gained more than 0.2 percent against a basket of other currencies, rising from near a 14-month low.

Crude and the dollar have recently been moving in an inverse price relation. When the dollar strengthens, crude becomes more expensive for holders of other currencies.

The dollar, often considered a "safe-haven" investment, rose in reaction to flagging U.S. consumer confidence, which fell to lower-than-expected levels in October of 47.7, from a revised 53.4 in September. The number was the weakest since July.

U.S. gross domestic product (GDP) data is due to be released Thursday. Analysts expect data to show that the U.S. economy grew 3.3 percent in the third quarter.