* Record rise in U.S. retail sales fuels optimism
* Weaker dollar helps oil rally
* Coming up: U.S. February wholesale inventories; 1400 GMT
(Updates prices)
By Emma Farge
LONDON, April 9 (Reuters) - Oil rose to around $86 a barrel
on Friday to within sight of 18-month highs as positive U.S.
economic data and rallying equities lifted expectations for
sustained energy demand growth in the United States.
World stocks and commodities rose after data on Thursday
showing a record 9.1 percent rise in March U.S. retail sales,
which boosted optimism about economic recovery prospects in the
world's biggest energy consumer. []
Global equities measured by the MSCI All-Country Index rose
0.5 percent <.MIWDOOOOOPUS> on Friday, snapping a two-day losing
streak.
Front-month U.S. crude <CLc1> rose 61 cents to $86.00 a
barrel by 1146 GMT, after earlier this week touching an 18-month
high of $87.09. ICE Brent <LCOc1> stood 85 cents higher at
$85.66 after climbing more than $1 to $85.94 earlier in the
session.
A dip in the dollar was also supportive for oil. A weaker
dollar makes crude oil more affordable for holders of other
currencies. <=USD>
"It's supported mostly by equity markets and a weaker
dollar. Also, we are in the proximity of the 18-month high and
that is driving speculative volumes into the market," said Eugen
Weinberg, head of commodities research at Commerzbank in
Frankfurt.
On whether a fresh test of the 18-month high was likely,
Weinberg said: "You cannot rule anything out since we've broken
out of the range. We're in somewhat uncharted territory."
Before this week, oil prices had traded in a broad range
between $65-$85 a barrel since last August.
TALE OF TWO CONSUMERS
U.S. oil consumption is gradually recovering from a year and
a half of decline. Over the past four weeks, total product
demand rose 1.9 percent from a year earlier, the Energy
Information Administration said on Wednesday.
But U.S. crude inventories reached their highest level in
almost 10 months after rising for 10 consecutive weeks last
week, an indication supply is still outpacing demand. []
For some, the fact that oil prices did not correct more
deeply and remain below $85 a barrel after the EIA data is an
indication of strong sentiment and high fund inflows at the
beginning of the new quarter.
Looking ahead, traders are expected to keep a close eye on
the yuan-dollar relationship. China, the world's second-largest
oil consumer, has pegged the yuan near 6.83 per dollar since
mid-2008 to help its exporters weather the global crisis.
But this has drawn increasing complaints from Washington
that the yuan is seriously undervalued, handing Chinese firms an
unfair trading advantage and effectively exporting unemployment.
Some think a revaluation would boost oil demand in the short
term as it will make dollar-denominated crude cheaper for
Chinese buyers.
"Oil is a dollar-denominated commodity, so if the dollar
gets weaker against the yuan, it will be cheaper for China to
buy oil," said Clarence Chu, an energy trader at Hudson Capital
Energy in Singapore. "In the short term, it could be bullish."
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Keiron Henderson)
