Positive US Housing Data Boost Oil Prices
U.S. crude oil rose more than 1 percent on Tuesday, exceeding gains in Brent crude, after strong U.S. housing market data bolstered confidence that economic growth and fuel demand were accelerating.
Financial markets rallied across the board when the S&P/Case Shiller composite index of 20 metropolitan areas showed single-family home prices rose in November for the 10th month in a row and posted its biggest year-on-year rise since August 2006.
Oil traders have been monitoring economic numbers for signs of a potential improvement in fuel demand.
Markets awaited the outcome of a two-day Federal Reserve policy meeting as well as first estimates for fourth-quarter gross domestic product in the United States on Wednesday.
(Read More: What Will It Take to Get the Fed to Stop Easing?)
Brent crude rose 88 cents to settle at $114.36 per barrel, having reached $114.49, its highest price since Oct. 16, 2012, while U.S. light, sweet crude gained nearly 1.2 percent to settle at $97.57, off its session high of $97.82. Trading volume was heavy, with U.S. crude 33 percent above its 30-day moving average and Brent more than 20 percent above than its own 30-day moving average.
(Read More: Expect Crude Rally to Continue: Futures Pros)
The Fed has said it expects to keep short-term U.S. interest rates exceptionally low to help support the economy. The low rates have helped push up oil prices, as investors pour cash into riskier asset classes.
"Economic optimism ahead of the Fed meeting and some technical momentum with U.S. crude able to stay above $95 have U.S. crude higher," said Phil Flynn, analyst at Price Futures Group in Chicago, referring to the housing data.
U.S. crude and RBOB showed some technical signs of being overbought. The 14-day relative strength index (RSI) in both front-month contracts traded above 70, which is generally seen as a sign that an instrument is overbought and could be set for a turn lower.
U.S. RBOB gasoline futures traded up 1.3 percent, adding to gains of 2 percent on Monday, following news Hess plans to close its 70,000-barrels-per-day Port Reading, New Jersey refinery.
The move stirred concerns about supplies to the region, which has seen a series of plants shut due to poor margins over the past three years. The region is expected to rely more heavily on imported crude as well as shipments from the Gulf Coast after the Port Reading plant closes in February.
U.S. front-month February refined products contracts expire on Thursday.
Traders were also awaiting data on U.S. crude and oil product stockpiles for clues on demand.
A Reuters survey, taken ahead of weekly inventory reports from the American Petroleum Institute and the U.S. government's Energy Information Administration, saw crude stocks rising by 2.6 million barrels on average for the week ended Jan. 25.
Gasoline inventories were forecast to be little changed, down 100,000 barrels for the week.