NEW YORK (Reuters) - Brent oil futures ended at a fresh three-month high on Tuesday as strong U.S. retail sales, tighter North Sea crude supplies and speculation about economic stimulus outweighed weak euro zone growth data.
U.S. crude futures closed nearly 1 percent higher after data showed July retail sales rose for the first time in four months and producer prices climbed at the fastest pace in five months, both supportive signals for oil.
"I think the strength of the retail sales numbers and (gains in the) stock market have pushed up (oil) demand expectations," said Carl Larry, president of Oil Outlooks LLC in New York.
In London, Brent for September delivery settled at $114.03 a barrel, rising 43 cents, after lengthy choppy trading on either side of unchanged. It was the highest settlement since May 3. The contract hit a session high of $114.30, below Monday's peak and a three-month intraday high of $115.11.
Benchmark London crude has risen nearly $8 this month to date, pushing the contract to near 73 on the 14-day Relative Strength Index, a technical signal that Brent is overbought. The overbought signal developed as September Brent heads for expiration on Thursday, keeping investors cautious.
U.S. September crude settled at $93.43, gaining 70 cents, having hit a session high of $93.92 which was below Monday's high of $94.14.
"The market is looking overdone, which is why prices have not reached Monday's highs," said Mark Waggoner, president of Excel Futures in Bend, Oregon.
In post-settlement trading, oil pared gains after the industry group American Petroleum Institute said domestic crude stocks rose 2.8 million barrels last week, defying a 1.7-million-barrel drawdown forecast in a Reuters poll. <API/S>
U.S. gasoline stocks fell 2.0 million barrels, above the forecast for a 1.5 million drawdown and distillate stocks rose 1.2 million barrels against the forecast for a 200,000-barrel decline. <EIA/S>
The U.S. Energy Information Administration (EIA) will issue its weekly data on Wednesday at 10:30 a.m. EDT (1430 GMT).
Brent's premium against U.S. crude edged down 27 cents to close at $20.60, from $20.87 on Monday.
Trading volumes were slim, with Brent down 20 percent from its 30-day average and U.S. crude 17 percent below its 30-day average, according to Reuters data.
Hopes that U.S. Federal Reserve Chairman Ben Bernanke would announce in a speech next month that the central bank will renew bond purchases for a third round of quantitative easing to support the economy kept oil futures supported.
"Investors are building in expectations of a QE3 ahead of the Jackson Hole speech by Bernanke," said Harry Tchilinguirian, an oil analyst at BNP Paribas in London.
China was also expected to step up its response to weaker growth, with stimulus likely in the form of more infrastructure projects, which would raise demand for base metals and energy.
The 17-nation euro zone's economy contracted by 0.2 percent in the second quarter, data showed. Germany eked out 0.3 percent growth, slightly beating forecasts.
Whether a weakening economy will make Germany, the region's powerhouse, less likely to support rescue efforts for the broader euro zone is the big question, analysts said.
Hopes remain that the European Central Bank will step in next month to help Spain and Italy cut borrowing costs after ECB President Mario Draghi's recent pledge to do all it takes to preserve the currency.
Oil investors were keeping a watch over tensions in the Middle East that could affect supplies. Iran remained at loggerheads with the West over its disputed nuclear program, which has raised alarms in Israel.
The United States does not believe Israel has made a decision on whether to attack Iran over its nuclear program, U.S. Defense Secretary Leon Panetta said, after sharp rhetoric from Israeli officials that has put financial markets on edge.
Additional reporting by Robert Gibbons and Janet McGurty in New York, Julia Payne in London, Manash Goswani in Singapore; Editing by Alden Bentley, Dale Hudson and Marguerita Choy