Natural gas continues to surge NEW YORK (MarketWatch) -- Crude-oil futures rose slightly on Tuesday, but were off earlier highs, as the market weighed upbeat U.S. economic data against expectations that crude supplies remain high. "We're going into the weakest period for demand of the year and inventories are going through the roof," said Phil Flynn, senior market analyst at Alaron Trading. "But with good economic data and weak dollar, it's hard to get too bearish. We're stuck in the middle right now." Crude oil for October delivery last gained 17 cents, or 0.3%, to $69.03 a barrel on the Comex division of the New York Mercantile Exchange. It earlier rose to an intraday high of $70.06. Oil futures finished below $69 a barrel Monday, as a trade row between China and the United States raised concerns about the global economy. Natural-gas futures also continued their recent surge, with the October contract up nearly 8%. Oil received an early boost with expectations that the U.S. economy is emerging out of recession after the government reported retail sales jumped a better-than-expected 2.7% in August. Separate reports showed manufacturing in the New York region improved in September, while U.S. producer prices were up 1.7% last month. Also lifting oil were reports that a faction of Nigerian rebel group Mend said it will end its ceasefire Tuesday. The rebels are known for attacking pipelines in Nigeria's oil-rich Niger Delta. "Yesterday we tried to break below $68 [a barrel] but couldn't get bearish enough and now we can't seem to break above $70," Flynn said. "The market remains undecisive and people are waiting for the supplies data from the American Petroleum Institute." The API, an industry group, is expected to report its estimate of weekly crude supplies after the close of trade on Tuesday. On Wednesday, the Department of Energy will release its estimates. After a big drawdown in inventories last week, supplies are again expected to drop, according to Flynn. But with supply still near 20-year highs, only another big drawdown in inventories could help support prices, he said. Earlier, the Organization of the Petroleum Exporting Countries said in its September monthly report that it still expects world energy demand to contract by 1.6 million barrels a day in 2009 and to grow by 500,000 barrels a day in 2010. The oil cartel still sees demand for its crude production estimated at 28.5 million barrels a day, the same as it forecast last month. "The rally in equity markets seems to be factoring in higher growth than the real economy can support and it is therefore likely that markets will remain at best within the current range for some time," OPEC said.

Source