NEW YORK (AP) — Oil prices settled higher after government reports suggested that the US economy is gaining strength.

Retail sales and industrial production both rose last month. The Labor Department reported separately that consumer prices excluding food and energy rose just 0.1 per cent last year, meaning that the risk of inflation is low.

Benchmark oil for February delivery rose 14 cents to settle at US$91.54 a barrel on the New York Mercantile Exchange.

Earlier Friday, oil prices dipped after the central bank in China raised the amount of money banks must keep on reserve, its latest effort to curb inflation and rein in growth.

Some analysts expect the US economy to stumble this year, weakening crude appetite. Capital Economics forecasts the oil price will fall to US$75 in 2011.

However, most economists — eyeing signs of improving US crude demand joining still-strong consumption in emerging markets — expect oil to breach US$100 this year.

“US oil demand in the second half of last year finally began to show strong growth again,” Morgan Stanley said in a report. “Importantly, we are still some way currently from the oil price challenging overall consumer spending.”

Morgan Stanley is predicting oil will average US$100 in 2011

Several promising economic reports were issued Friday.

Industrial production rose in December by the largest amount in five months, providing the US economy with solid momentum heading into the new year. Activity at the nation’s factories, mines and utilities increased 0.8 per cent last month, the Federal Reserve said. Industrial production was up in every month but one in 2010.