A steep slide in gasoline stockpiles in the United States sparked concern of a potential supply crunch when drivers hit the roads this summer, boosting oil prices on Wednesday.
The rising concern over fuel stocks came against the backdrop of simmering tensions between the United States and oil exporter Iran, and production cuts by OPEC.
Gasoline futures on the New York Mercantile Exchange soared 2.2% to an eight-month high of $2.17 a gallon Wednesday after a government report showed inventories in the world's top
consumer fell for the ninth consecutive week. Gasoline settled up 3.57 cents or 1.7% to $2.1587. Heating oil and natural gas also traded higher.
Refinery outages, strong demand, and falling import levels have slashed U.S. gasoline supplies more than 12% since early February, at a time of year the oil industry typically boosts storage for the summer driving season.
"With dynamics like these, $3 retail gasoline looks to be right around the corner," said Jason Schenker, economist at Wachovia Bank in North Carolina.
U.S. crude oil settled up 12 cents or 0.2% at $62.01 a barrel.
U.S. crude oil is up over 20% from a 2007 low of $49.90 in January, despite a 6% fall over the past week.
U.S. stock prices fell amid rising concern over energy prices, with the Dow Jones industrial average down 89.23 points to 12,484.62.
Iranian tensions have helped lift London Brent crude to a record premium of around $6 a barrel against U.S. crude, which has been weighed down by relatively high stocks at the U.S. storage hub at Cushing, Oklahoma.
A top Iranian official on Wednesday dismissed doubts over Iran's recent declaration it had begun industrial enrichment of uranium, a process the West believes could lead to making atom bombs rather than the nuclear fuel Iran says it needs.
Separately, the U.S. military accused Iranian intelligence services of providing weapons to militants in Iraq and said gunmen were being trained in Iran in the use of lethal roadside bombs.
Adding support to crude markets, members of the Organization of the Petroleum Exporting Countries have agreed to production cuts totaling 1.7 million barrels per day since last October.
Dealers were also watching robust demand growth in China. The world No. 2 oil consumer's crude imports for March jumped 8.9% versus year-ago levels to a near record, government data showed Tuesday.
"You still have in the background a significant global tightening, which has been in progress all year," said Paul Horsnell of Barclays Capital, pointing to robust world demand without sufficient increase in supply to meet it.