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An oil refinery is seen in this file photograph. Picture: REUTERS
An oil refinery is seen in this file photograph. Picture: REUTERS

London — Oil prices rose on Tuesday on high summer demand while supplies remain tight because of sanctions on Russian oil after its invasion of Ukraine.

Brent crude rose $1.61, or 1.4%, to $115.74 a barrel by 8.25am GMT. West Texas Intermediate crude for July delivery, which expires later on Tuesday, rose $2.29, or 2.1%, to $111.85. The more-active contract for August was up $2.48 at $110.47 a barrel.

UBS analyst Giovanni Staunovo said that despite concerns about economic growth, the latest data on flight activity and traffic on US roads continues to show solid oil demand.

“We expect oil demand to improve further, benefiting from the reopening of China, summer travel in the northern hemisphere and the weather getting warmer in the Middle East. With supply growth lagging demand growth over the coming months, we continue to expect higher oil prices,” he said.

Prices have been supported by supply anxiety after sanctions on oil shipments from Russia, the world’s second-largest oil exporter, and questions about how Russian output might fall due to sanctions on equipment needed for production.

“Supply concerns are unlikely to subside unless there is a resolution to the Russia-Ukraine war, or unless we see a sharp rise in supply from either the US or Opec,” said Madhavi Mehta, commodity research analyst at Kotak Securities.

Prospects are receding for successful negotiation of a nuclear deal with Iran and the subsequent of US sanctions on the Iranian energy sector. Iran is escalating its uranium enrichment by preparing to use advanced centrifuges at its underground Fordow site, according to a UN nuclear watchdog report.

“Iran’s measures, if correct, probably mean we won’t be seeing a return of Iranian crude to greater world markets any time soon,” said Oanda analyst Jeffrey Halley.

Weekly US petroleum inventory data will be delayed by a day this week because of a US public holiday on Monday, with the American Petroleum Institute industry data for the week ending June 17 due on Wednesday and US Energy Information Administration data scheduled for Thursday.

Reuters

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