NEW YORK (Reuters) - Brent crude prices settled at an 11-month high on Tuesday as improving German economic sentiment, rising U.S. retail sales and the U.S. central bank's reiteration that it plans to keep interest rates low fuelled optimism about growth.
After a one-day meeting, the U.S. Federal Reserve also acknowledged signs of strength in the economy and said recent financial market strains have eased, offering few clues on the chances for further monetary easing.
"The Fed decision is supportive for the oil market," said John Kilduff, partner at Again Capital LLC.
"By not announcing further measures, for now, current conditions that have improved modestly and that have rallied energy prices off their October lows should continue to be the primary factor in determining price direction," Kilduff added.
Brent April crude rose 88 cents to settle at $126.22 a barrel, the highest close since April 8, 2011, having swung from $125 to $126.79.
U.S. April crude rose 37 cents to settle at $106.71 a barrel, having reached a high of $107.35. It fell as low as $105.67 intraday, testing below its 10-day moving average at $106.73 and 20-day moving average at $106.01.
Brent's premium to U.S. crude firmed to $19.51 a barrel, based on settlements.
Trading volumes remained lackluster and below 30-day averages as post-settlement trading neared an end.
German analyst and investor sentiment jumped in March to its highest since June 2010, according to the Mannheim-based ZEW economic think tank's monthly survey, well above the consensus forecast.
U.S. retail sales for February posted their largest gain in five months, but sparked some profit-taking initially in oil futures as investors saw fading chances of a third round of quantitative easing from the Fed.
The German and U.S. data arrived a day after euro zone finance ministers gave their final approval to a second bailout package for Greece.
The major U.S. stock indexes closed at multi-year highs, lifted by the U.S. retail sales improvement and the reduced concerns about the euro zone's debt crisis. European shares climbed to their highest in more than seven months. .N .EU
Brent and U.S. crude briefly turned lower intraday when the strong U.S. retail sales data stoked the dollar and investors awaited signals from the Fed policy meeting.
The dollar touched an 11-month high against the yen and a one-month peak against the euro. <USD/>
Eurozone crisis in graphics r.reuters.com/hyb65p
The dispute between Iran and the West over Tehran's nuclear program has helped send Brent prices up nearly 18 percent in 2012, and U.S. crude up 8 percent.
Iran has lowered April official selling prices for most of its crude oil, while raising them for Asia, according to trade sources said. <ID:L5E8EDAV8>
Any increase in OPEC production to offset European Union sanctions on importing Iranian oil ahead of the July 1 embargo is unlikely, Gulf sources said, though the United States is pressing Saudi Arabia to boost output to fill the expected supply gap.
A U.S. official declined to comment on the talks, saying only, "We consult regularly with the Saudis on a range of bilateral and global energy issues."
U.S. commercial crude inventories rose 2.8 million barrels in the week to March 9, industry group the American Petroleum Industry said in a report released late Tuesday.
Gasoline stocks fell 2.1 million barrels and distillate stocks fell 3.5 million barrels, the API said.
Ahead of the API report, crude inventories were expected to have risen 1.7 million barrels, according to a Reuters survey of analysts. Gasoline stocks were expected to be down 1.0 million barrels and distillates to have fallen 1.3 million barrels.
High prices dented U.S. retail gasoline demand last week, pushing it 1.4 percent lower from the previous week and 7.2 percent from the year-ago period, MasterCard said in a separate report.
The U.S. government's oil inventory report from the Energy Information Administration will follow on Wednesday at 10:30 a.m. EDT (1430 GMT).
Additional reporting by Claire Milhench in London and Florence Tan in Singapore; Editing by Marguerita Choy, Dale Hudson and David Gregorio