NEW YORK – Oil rose to nearly $72 Tuesday on U.S. gasoline supply concerns heading into peak vacation season as demand from motorists in the world's top consumer holds strong in the face of high pump prices.
U.S. crude settled 12 cents higher at $71.92, building on a 93 cent gain on Monday. London Brent crude rose 25 cents to $70.98.
Oil gained following news that a key shipping channel near Lake Charles, Louisiana, will remain shut two to four more days to clean up an oil spill.
Three nearby oil refineries remain cut off from crude shipments and have reduced fuel production, and ConocoPhillips (COP) Tuesday asked the government to provide 500,000 barrels of crude from the U.S. Strategic Petroleum Reserve to make up for lost supply.
The disruptions come days ahead of the July 4 Independence Day holiday, when gasoline demand typically peaks as Americans take to the roads for vacation.
U.S. crude has traded between $69 and $72 for more than a month as the market balances geopolitical tensions and rising global demand against inflation fears and brimming U.S. fuel stocks.
"There are not a lot of reasons to sell right at this moment and this lack of downward pressure has released the spring," said Geoff Pyne at ABN AMRO.
U.S. drivers are buying more motor fuel than last year, despite paying almost $3 a gallon at the pump.
U.S. oil inventory data, due to be released Wednesday, is expected to show that domestic gasoline supplies rose only slightly last week, with strong demand continuing at above 9 million barrels per day (bpd), according to a Reuters survey of analysts.
The inventory data is also expected to show an 800,000-barrel drop in domestic crude supplies, due to the closure of the Louisiana shipping channel.
Signs of strong demand are easing worries that high oil prices are feeding inflation that could hit economic growth and dampen consumers' thirst for oil.
U.S. Federal Reserve policy-makers, gathering Wednesday and Thursday, are widely expected to raise interest rates and signal that further increases may be needed to keep inflation in check.
Adjusted for inflation, oil is at its most expensive since 1980, the year after the Iranian revolution, and is holding near its record $75.35 hit in April after a rally that has taken prices up from $20 at the start of 2002.
The rally has come on fund buying amid fears over real and potential disruptions.
OPEC's No. 2 producer, Iran, repeated Sunday it stood ready to use its 2.5 million bpd of exports in self-defense if threatened by a dispute over its nuclear program.