Oil prices rose Monday after the government said consumers spent more in July, easing concerns about another recession.
It was the latest in a series of reports that indicated the economy improved last month, which could strengthen demand for oil and gasoline.
Benchmark oil rose $1.90, or 2.2 per cent, to finish at $87.27 per barrel in New York. Brent crude, used to price international varieties, increased 52 cents to end at $111.88 per barrel in London.
The Commerce Department said July consumer spending increased by the biggest amount in five months. Consumer spending accounts for 70 per cent of the nation’s economic activity. The report is an encouraging sign about the economy despite weak demand for gasoline, PFGBest analyst Phil Flynn said.
“The consumers may be saying they’re not that confident but their spending is telling a different story,” he said.
Energy analyst Jim Ritterbusch cautioned not to read too much into one report. A batch of economic news is expected this week that could provide a clearer picture of where the economy is headed — including unemployment numbers and manufacturing activity.
At the pump, gasoline was virtually unchanged Monday at a national average of $3.61 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That’s about 4 cents more than a week ago and 93 cents more than a year ago.
In the Northeast, there will be a bigger drop in demand over the next week or so because so many drivers filled up their tanks ahead of Hurricane Irene, said Tom Kloza, chief oil analyst at Oil Price Information Service.
“It strained the system but the system will recover very, very quickly,” he said.
There have been few reports of shortages at gas stations. “There should not be problems and people shouldn’t worry that it’s going to take forever to catch up,” Kloza added. “We’ll catch up in a couple of days in terms of reasonable supply.”
Most refineries in the Northeast were spared significant damage from Irene. ConocoPhillips said one of its refineries in New Jersey was shut down temporarily, and two Sunoco refineries in Pennsylvania were operating at reduced rates.