NEW YORK Oil rose on Tuesday along with equities on hopes that the U.S. Federal Reserve might indicate fresh stimulus measures later this week, with oil also drawing support from fighting in Libya and disrupted Nigerian exports.
U.S. major stocks indexes rose more than 2 percent as investors jumped into the market before a highly anticipated address by Federal Reserve Chairman Ben Bernanke later this week in Jackson Hole, Wyoming, where policymakers and academics meet once a year. .N
Some investors expect Bernanke to signal more Fed quantitative easing measures ahead to stimulate a sluggish U.S. economy.
"This is a rally driven on hopes of Bernanke saying something about more stimulus," said Bill O'Grady of Confluence Investment Management in St. Louis.
"In Libya, rebels are in an urban warfare situation and Gaddafi hasn't fallen, increasing the risk of oil disruptions and a lengthy period before production can resume."
Brent October crude rose 95 cents to settle at $109.31 a barrel, having swung from $107.20 to $109.79.
U.S. October crude rose $1.02 to settle at $85.44 a barrel, having reached $86.39.
There were no initial reports of damage to major oil infrastructure after an earthquake struck the U.S. East Coast and shook buildings from Virginia to Boston.
Colonial Pipeline shut its main refined products pipelines north of Greensboro, North Carolina, as a precaution due to the earthquake.
In top African oil producer Nigeria, Royal Dutch Shell (RDSa.L) declared a force majeure on Tuesday for exports of Bonny Light crude through October, following a hacksaw attack on a pipeline.
Trade sources said the entire Bonny Light program of around 200,000 barrels per day in exports has been withdrawn.
Crude rose early on Tuesday, following manufacturing data from China and Germany that was less gloomy than some economists had expected.
The data helped to boost the euro against the U.S. dollar, which slid about 0.3 percent against a basket of foreign currencies .DXY. A weaker dollar can boost oil prices by making crude cheaper for foreign currency holders. <USD/>
Weaker U.S. home sales data in July did nothing to curb a stock market rally, as some investors read the data as justification for more Fed stimulus.
Rebels gained control over large portions of Libyan capital Tripoli, but some forces remaining loyal to the Muammar Gaddafi regime fought back in street battles.
Rebels said they had gained control of a key Libyan oil export terminal, Ras Lanuf, and found it intact with no damage. But many analysts do not expect Libyan crude exports to restart quickly after being shut for months during a civil war.
Brent's premium to U.S. crude fell below $23 a barrel intraday, before expanding again to around $24.
The spread has narrowed after reaching a record high $26.69 on Friday.
U.S. OIL INVENTORIES
U.S. crude inventories are expected to have risen last week, according to a Reuters expanded survey of analysts on Tuesday.
Crude stocks were expected to be up 800,000 barrels, with distillates up 700,000 and gasoline stockpiles down 900,000 barrels.
U.S. retail gasoline demand fell again last week despite another drop in pump prices, MasterCard said a weekly report.
Oil inventory data from industry group the American Petroleum Institute is due at 9:30 p.m. BST on Tuesday. The government report from the Energy Information Administration will follow on Wednesday.
(Additional reporting by Gene Ramos and Janet McGurty in New York and Simon Falush in London; Editing by Andrea Evans and David Gregorio)