Oil rises above $79, eyes product demand
NEW YORK (Reuters) - Oil prices rose slightly on Tuesday, topping $79 a barrel, as demand for oil products supported crude, outweighing pressure from a stronger dollar.
U.S. crude for December delivery settled up 24 cents at $79.14. Brent crude for January delivery rose 21 cents to settle at $78.97.
Products futures rose on the promise of demand increases heading into the holiday season.
"There is a feeling that demand, after all, will improve in the upcoming holidays," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
Investors have scrutinized economic data in recent months for signs of global recovery and a potential rebound in energy demand.
"Today, we're seeing crude futures buck the trend as they are not at this point moving in the usual correlation with the dollar or the equities markets," said Andy Lebow, broker, MF Global, New York.
The dollar on Tuesday rebounded strongly from its 15-month lows, making commodities such as crude more expensive. Gold also fell as the dollar rose.
Markets expect the Federal Reserve to keep interest rates near zero for some time, and this sentiment has weighed on the dollar and fueled gains in raw materials in recent weeks.
Wall Street stocks were little changed on Tuesday as outlooks from Target (TGT.N) and Home Depot (HD.N) sparked caution about holiday spending, offsetting upbeat broker views on Microsoft (MSFT.O) and Exxon Mobil (XOM.N).
U.S. oil inventory data from industry group the American Petroleum Institute is due later on Tuesday and the government's figures follow on Wednesday.
An updated Reuters poll showed analysts expect data for last week to show a draw of 300,000 barrels in crude stocks, with distillates down 700,000 barrels and gasoline unchanged.
Oil has rallied from below $33 last December even though global demand fell year-on-year for the first nine months of 2009, according to the International Energy Agency, and demand in wealthy countries has not improved much.
Still, some analysts expect demand from emerging markets will more than compensate, boosting fuel consumption down the road.
"The market is increasingly expecting EM (emerging markets) demand to crowd out future OECD demand growth, and is putting upward pressure on long-dated prices, leaving the market in a new higher trading range of $75 to $82," Goldman Sachs said in a report.
(Additional reporting by Gene Ramos and Robert Gibbons in New York, Alex Lawler in London and Fayen Wong in Perth; Editing by David Gregorio)
