SINGAPORE – Oil prices hovered below $92 a barrel Tuesday in Asia near a two-year high as a stock market rally to start 2011 boosted crude trader optimism.
Benchmark oil for February delivery rose 7 cents to $91.62 a barrel midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 17 cents to settle at $91.55 on Monday.
U.S. stock markets advanced the first trading day of the year as data showed recent manufacturing activity and construction spending rose more than analysts were predicting.
The S&P 500 stock index gained 1.1 percent Monday and most Asia equity markets rose Tuesday, led by a 1.7 percent jump in Japan's Nikkei 225 index.
Oil investors often look to equities as a barometer of overall investor sentiment.
"This ongoing burst of economic optimism is enhancing the oil market's attractiveness as an asset class," Ritterbusch and Associates said in a report. "We look for this momentum to be sustained as long as the stock market maintains a northerly course."
In other Nymex trading in February contracts, heating oil gained 0.7 cent to $2.56 a gallon while gasoline futures rose 0.3 cent to $2.43 per gallon. February natural gas futures fell 0.1 cent to $4.64 per 1,000 cubic feet.
In London, Brent crude rose 16 cents to $95.00 a barrel on the ICE Futures exchange.
NEW YORK (Reuters) – U.S. retailers should post another month of strong sales gains for December, capping their best holiday season since 2007, amid doubts that shoppers will keep spending as enthusiastically in the new year.
Wall Street analysts expect top U.S. chains to report that sales at stores open at least a year, or same-store sales, rose 3.3 percent in December.
That would come on top of a 2.9 percent jump a year earlier, when the economic recovery started taking hold, but slower than the 6 percent increase reported for November.
Shoppers turned out in greater numbers this year, buoyed in part by pent-up demand after two seasons of frugality and a general sense that the economy is finally improving.
Still, Wall Street is fretting that shoppers will put their wallets away for a while, now that Christmas is over.
"People have tended to shop during the times they need to, like holidays or back to school," said Nomura analyst Paul Lejuez. "During off periods, they haven't been coming out."
Deeming the holidays a success will hinge on whether department stores, teen apparel chains and others were able to lure shoppers without going overboard with promotions.
"A good December might not mean a great January, February, March," Lejuez said.
Chains such as Target Corp, TJX Cos Inc, J.C. Penney Co Inc and Abercrombie & Fitch Co will report sales numbers on Wednesday and Thursday.
Analysts are watching this week's reports for changes to sales and profit forecasts. They want to know whether the December sales gains were "bought" with profit-eroding price slashing, in which case retailers might hold off on raising their own profit forecasts even if sales are up.
So far, though, most analysts say the season's discounting was not out of line.
Last week's massive blizzard that dumped as much as three feet of snow on parts of the U.S. Northeast likely put a small dent in December sales. Research firm ShopperTrak has estimated that $1 billion in retail sales may have been postponed due to the storm. International Council of Shopping Centers chief economist Michael Niemira told Reuters the snowstorm could lower the December sales growth rate by 0.5 percentage point, though some purchases may show up in January.
February's Valentine's Day is important for specialty retailers such as jeweler Tiffany & Co, but retailers have to wait until Easter, in late April, for the next major shopping occasion.
The spending recovery helped the S&P Retail Index rise 23.4 percent in 2010, compared to the broader S&P 500's increase of 11.7 percent. However, the index has stalled since early December on fears the rally has run out of steam.
(For a graphic comparing same-store sales and the S&P Retail Index please see: http://r.reuters.com/teb54r )
WINNERS & LOSERS
December's biggest winners are expected to include department stores such as Macy's Inc, J.C. Penney and Kohl's Corp as enough shoppers are on sounder financial footing for them to trade back up to those chains from off-price retailers.
Department stores have also won shoppers away from specialty clothing stores by ramping up their exclusive lines.
At the same time, with unemployment still near 10 percent, discounters still draw shoppers and should report some of the biggest gains, aided all the more by their forays into fresh food and, in Target's case, a push into consumer electronics that has damaged Best Buy.
Deutsche Bank analyst Bill Dreher named Kohl's, upscale department store Nordstrom Inc and Target among his top stock picks.
Still, whether Target can keep its streak in electronics is tough to determine given its aggressive pricing and deeper inventory, said Janney Capital Markets analyst David Strasser.
Target and other retailers that cater to a lower-income group, including off-price retailer Ross Stores, may struggle later this year if gas prices keep rising, said Richard Hastings, a consumer strategist at Global Hunter Strategies.
Ross and TJX Cos, parent of the T.J. Maxx and Marshalls chains, sell brand name merchandise, much of it excess inventory returned from department stores, at steep discounts. In December 2009 TJX was a standout with a 14 percent jump in same-store sales. For December 2010, analysts predict a 2.8 percent decrease.
December was also a big test for teen retailers, particularly Aeropostale, which reported weak November sales and, according to the New York Post, has hired a strategic advisor to fend off any unwanted advances by buyout firms.
Analysts expect Abercrombie & Fitch to report a same-store sales increase of 9.3 percent, aided by higher prices and more modest promotions than its peers.
In contrast, Aeropostale and American Eagle Outfitters slashed prices on many items throughout the holiday season and are expected to report only modest same-store sales declines for December.
(Reporting by Phil Wahba; Editing by Phil Berlowitz)
SAN MATEO, Calif. – Federal investigators issued a number of urgent safety recommendations Monday, pressing for new scrutiny at the California utility responsible for the gas pipeline that exploded in a San Francisco suburb last year, killing eight people.
Six of the National Transportation Safety Board's seven recommendations were marked urgent, a classification the board reserves for only the most serious problems its investigators encounter each year.
The board is still probing what caused the Sept. 9 explosion, which sparked a gigantic fireball that engulfed a San Bruno neighborhood and destroyed more than three dozen homes. Officials have not determined an exact cause but suspect the pipeline may have burst under high pressure.
One of the urgent recommendations asks Pacific Gas & Electric Co. to identify all gas transmission lines that haven't undergone testing for safe operating pressures. The NTSB also urged California regulators to make sure the utility follows through on the testing.
The board said if PG&E can't figure out safe pressure levels using old records or drawings, the utility should perform high-pressure water tests, which could impact customers who rely on natural gas for cooking or heating if the pipes fail during the test.
The NTSB's recommendations follow a disclosure by federal accident investigators last month that, contrary to PG&E's records, the spine of the ruptured pipeline had a type of weld that investigators are now examining in their search for a cause for the explosion.
PG&E's documents showed that the pipeline in the area of the rupture was constructed of seamless pipe, and "these inaccurate records may lead to potentially unsafe maximum allowable operating pressures," the NTSB's report said.
Deborah Hersman, the safety board's chairwoman, said the agency fears such record-keeping problems could be mirrored elsewhere in the country.
"We're very concerned about making sure operators nationwide know what kind of pipe is on their lines," Hersman said in an interview. "This was a tragic accident and we wanted to make sure we got this information out urgently."
Federal investigators also plan to hold a hearing about the explosion in Washington in March — the first such hearing on a pipeline accident in a decade — and will use information gathered there to guide future recommendations, Hersman said.
The NTSB has only a handful of full-time pipeline accident investigators and no regulatory power to enforce its recommendations. That is largely left up to the Pipeline and Hazardous Materials Safety Administration, which enforces rules for the safe operation of interstate pipelines. Most state public utility agencies have adopted the federal rules and carry out inspections and enforce regulations on pipelines inside state boundaries.
The federal agency is working to quickly to address a recommendation to publicize the problems leading up to San Bruno to the industry, PHMSA spokeswoman Julia Valentine said.
The California Public Utilities Commission sent a letter Monday to PG&E president Christopher Johns directing the company to follow the NTSB's directives. The commission also sent letters to the state's three other natural gas pipeline operators asking them to report on any steps they are taking in response to the recommendations.
PG&E spokesman Denny Boyles said the company already had started a thorough review of its records and is working with NTSB to make sure the utility understands the recommendations, but did not say how many miles of the utility's lines were not pressure tested.
Glen Stevick, an independent pipeline consultant in Berkeley, said investigators took a step in the right direction, but cautioned that checking whether utilities have performed tests on old lines won't necessarily identify all the potential flaws in old pipes coursing beneath people's homes.
"You've got to look at what has happened since the test was performed and determine how big those flaws in the pipe would have grown today," Stevick said.
Hersman said she expects the NTSB will finalize its investigation by September.
"There are still so many unanswered questions," said Rep. Jackie Speier, a California Democrat who represents the San Bruno area, who plans to reintroduce a bill this week that would, among other things, require utilities to tell residents if a high-pressure gas transmission line runs near their property. "We must know what's under the ground, and we need to know at what pressure these pipes can be operating."
Burke reported from Fresno, Calif.