NEW YORK (Reuters) - Oil inched up toward $87 a barrel on Tuesday, rallying for a sixth consecutive session, as recent positive economic data launched futures to a fresh 18-month high.
Gains were tempered by a stronger dollar, while investors remained cautious ahead of weekly U.S. oil inventory data later on Tuesday.
U.S. crude for May delivery rose 22 cents to settle at $86.84 a barrel, the highest settlement since October 2008. In London, ICE Brent rose 27 cents to settle at $86.15.
Oil prices rose more than 2 percent on Monday after U.S. manufacturing, home sales and jobs data boosted optimism about a recovery in the world’s top oil consumer.
“As we turn our attention to the inventory reports, we will see if they finally give us some fundamental support to push prices higher,” said Gene McGillian, analyst at Tradition Energy in Stamford Connecticut.
“It will be interesting to see if there is a pattern where the market looks and says we don’t have the supply-demand numbers to be up here which makes the longs nervous and tends to make them bail pretty quickly.”
U.S. crude inventory statistics were due later on Tuesday from the American Petroleum Institute (API), and on Wednesday from the U.S. Department of Energy’s Energy Information Administration (EIA).
Crude inventories in the United States probably gained for a 10th consecutive week last week, an updated Reuters survey showed on Tuesday.
Crude stockpiles were forecast to have risen 1.8 million barrels, according to a Reuters poll, while a 1.2 million barrel drawdown was expected in distillate stocks comprising heating oil and diesel, with an 800,000-barrel draw expected for gasoline.
A stronger dollar helped cap crude’s gains on Tuesday. The euro fell broadly after reports that Greece wants to amend a European Union aid deal rekindled worries over Athens’s deficit problems.
A stronger dollar denotes a move to safer havens from assets deemed more risky, like commodities or equities and tends to pressure crude prices.
The U.S. Energy Information Administration cut its 2010 world oil demand growth forecast by 10,000 barrels per day from its previous estimate to 1.46 million bpd on Tuesday, which also weighed on sentiment.
“We’re starting to come to a point where these oil prices could start to put the economic recovery at risk. Whatever we had last year was at an average $62 a barrel. It’s another thing to continue on the recovery path with $90 oil,” said independent oil analyst Olivier Jakob at Petromatrix in Switzerland.
Big oil producers could face a test as oil heads well above the $70-$80 range trumpeted by OPEC members this month as good for them as well as consumer nations.
Additional reporting by Gene Ramos and Robert Gibbons in New York, Chris Baldwin in London, Alejandro Barbajosa in Singapore; editing by Marguerita Choy