Crude oil futures fall to session low as dollar gains on retail sales

Crude oil futures fell to the lowest levels of the session on Tuesday, as the U.S. dollar strengthened across the board after official data showed that U.S. core retail sales rose at the fastest pace in seven months in July.

Market players also looked ahead to the release of key U.S. weekly supply data to gauge the strength of oil demand from the world’s largest consumer.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD105.93 a barrel during U.S. morning trade, down 0.15%.

Nymex oil futures rose by as much as 1% earlier in the session to hit a daily high of USD107.19 a barrel, the strongest level since August 6.

The September contract settled up 0.15% at USD106.11 a barrel on Monday.

Oil futures were likely to find support at USD103.63 a barrel, the low from August 9 and resistance at USD107.23 a barrel, the high from August 6.

The Commerce Department said core retail sales, which exclude automobile sales, rose 0.5% in July, compared to forecasts for a 0.4% increase.

Core retail sales for June were revised up to 0.1% from a flat reading.

Overall retail sales rose by a seasonally adjusted 0.2% last month, missing expectations for a 0.3% increase. 

Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.

The data added to the view that the economic recovery is strong enough for the Fed to begin phasing out its asset purchase program later this year.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.5% to trade at 81.84.

A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro.

Oil traders now looked ahead to the release of fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer. 

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 1.5 million barrels.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery inched up 0.25% to trade at USD109.24 a barrel, with the spread between the Brent and crude contracts standing at USD3.31 a barrel.

Brent futures were supported amid renewed concerns over a disruption to supplies from Libya, where striking security guards reimposed a two-week-old shutdown at the country’s two biggest crude export terminals.