Oil rose on Tuesday after data showing gains in U.S. retail sales and producer prices outweighed concerns about growing U.S. distillate inventories.

U.S. retail sales rose at the fastest pace in 3-1/2 years in August and New York State manufacturing activity hit a near two-year high, data showed, more sings that economic activity was improving.

A separate report showed prices received by U.S. producers rose faster than expected last month.

U.S. crude for October delivery rose 20 cents to $69.06 a barrel by 12:03 p.m. EDT. October Brent -- which was pressured ahead of the contract's expiration Tuesday -- fell 60 cents to $66.84 a barrel.

Traders have been looking to equities markets and wider economic data for signs of a turnaround that could bolster flagging oil demand.

Looks like retail sales and PPI data supported (prices), said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

The Organization of the Petroleum Exporting Countries said signs of a rebound the world economy appeared to be gathering but that recovery would be gradual.

The dollar climbed against a basket of major currencies on expectations the United States would be at the fore of any global recovery, making commodities denominated in the greenback more expensive to holders of other currencies.

Expectations U.S. inventory data will show another build in distillate stocks as the world's top consumer begins to gear up for winter also helped limit gains.

Analysts forecast data from the American Petroleum Institute due out later on Tuesday and Energy Information Administration on Wednesday will show a 1.5-million-barrel increase in distillates last week.

There is a concern about inventory building, Christophe Barret, analyst with Calyon, told Reuters Television.

The amount of gasoil in storage will put some pressure on crude prices in the coming weeks, Barret said.

Gasoline stocks were seen up by 800,000 barrels, while crude stocks were seen down by 2.7 million barrels.

(Reporting by Matthew Robinson, Robert Gibbons and Gene Ramos in New York, Catherine Bosley and Jane Grieve in London and Sambit Mohanty in Singapore; Editing by Christian Wiessner)

Retail sales