Oil hits 13-week high on rising US gasoline demand

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The move has increased tensions with the United States and other countries negotiating with Iran over its nuclear program, and will likely keep sanctions in place and Iranian oil off the world market for longer.

Oil prices jumped more than 2% to a 13-week high on Wednesday as U.S. gasoline demand continues to rise despite record pump prices, while expectations that oil demand from China will increase have faced increasing supply problems in several countries, including Iran.

Iran has said it is removing two International Atomic Energy Agency surveillance cameras from a uranium enrichment facility as the United Nations nuclear watchdog’s board of directors has warned. passed a resolution criticizing Iran for not fully explaining the traces of uranium at undeclared sites.

The move has increased tensions with the United States and other countries negotiating with Iran over its nuclear program, and will likely keep sanctions in place and Iranian oil off the world market for longer.

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Analysts have said a nuclear deal with Iran could add about 1 million barrels per day (bpd) of crude to global supply.

Brent crude futures rose $3.01, or 2.5%, to settle at $123.58 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2.70 $, or 2.3%, to end at $122.11.

These were the highest closes for Brent and WTI since March 8, which were their highest settlements since 2008.

Commercial inventories of U.S. crude oil rose unexpectedly last week, while Strategic Petroleum Reserve (SPR) crude fell by a record amount as refiner inputs hit their highest level since January 2020, said the Energy Information Administration.

Gasoline inventories in the United States fell by a surprise 800,000 barrels as demand for fuel rose despite sky-high pump prices. Analysts polled by Reuters had expected gasoline inventories to rise by 1.1 million barrels. [EIA/S] [API/S]

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“The gasoline draw is a high point in the report with a tight market across the United States,” said Tony Headrick, energy market analyst at CHS Hedging, noting that demand remained strong even with pump prices above $5 a gallon in many parts of the country.

The AAA Automobile Club said national average retail prices for regular unleaded gasoline hit a record high of $4.955 a gallon on Wednesday.

China’s major A-share indices and Hong Kong’s Hang Seng ended trading at two-month closing highs. Oil traders expect fuel demand to pick up as containment measures to fight the pandemic are eased at the world’s biggest oil importer.

“With demand recovering to 1.0 million bpd in China and increasing seasonally in the United States, even record SPR withdrawals may prove insufficient to … balance a grossly undersupplied market,” EBW Analytics analysts said in a note.

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The International Energy Agency has warned that Europe, which sanctioned Russia over its invasion of Ukraine, could face power shortages next winter.

On the supply side, traders noted that several countries could face problems increasing production.

In Norway, a number of oil workers plan to strike from June 12 over wages, putting some crude oil production at risk of shutting down.

Efforts by the Organization of the Petroleum Exporting Countries and their allies, including Russia, a group known as OPEC+, to increase production are “not encouraging”, the U.S. energy minister said. United Arab Emirates, Suhail al-Mazrouei, noting that the group currently has a population of 2.6 million. bpd below target.

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