Oil settles above $54
Futures rise after strong readings on pending home sales and construction spending suggest the economy is stabilizing.
NEW YORK (CNNMoney.com) -- Oil prices rose Monday as investors responded to better-than-expected readings on pending home sales and construction spending.
Light, sweet crude for June delivery rose $1.27, or 2.4%, to settle at $54.47 a barrel.
Oil has averaged about $50 a barrel in recent weeks - down nearly $100 a barrel from last summer's all-time high - as concerns about anemic demand and swelling inventory levels have weighed on the market.
But recent readings on housing, manufacturing and consumer spending have raised hopes that the U.S. economy, the world's largest consumer of oil, is on the mend.
Economic reports released Monday helped bolster the optimistic tone.
Pending home sales jumped 3.2% in March, according to the National Association of Realtors. It was the second month that sales had increased and toped economists expectations.
Another report showed construction spending rose 0.3% in March, driven partly by a big increase in spending by state and local governments. Analysts had expected a 1.5% drop in spending.
On Wall Street, the upbeat reports sent stocks up more than 2% in afternoon trade.
Many oil traders view the stock market as a leading indicator of economic activity and a barometer of future energy demand. As a result, oil prices often rise and fall in tandem with the major stock indexes.
Still, the market is expected to trade "in a somewhat mixed direction" this month as investors remain skeptical of the short-term economic outlook, according to Tom Pawlicki, energy analyst at MF Global in Chicago.
"Not many factors fundamental to crude oil have shown improvement," Pawlicki wrote in a research report.
The nation's stockpiles of crude are at their highest levels since 1990, while demand for oil is down nearly 11% to its lowest level since 1999.
In addition to the poor fundamentals, the results of the government's so called "bank stress tests" could dampen recent enthusiasm about a possible economic recovery, analysts said.
The tests, which were conducted on 19 of the nation's biggest banks, will determine which are healthy enough to withstand another financial shock and which need to raise more capital. The results are expected later this week.
"This leaves us in a position to expect long-term gains while being on guard against a near-term correction," Pawlicki said.