Oil prices hit a fresh three-year high on Thursday ahead of a U.S. decision on whether to extend temporary waivers on sanctions against Iran.
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Light, sweet crude for February delivery settled up 23 cents, or 0.4%, to $63.80 a barrel on the New York Mercantile Exchange, the highest close since December 2014. Brent, the global benchmark, gained 6 cents, or 0.1%, to $69.26 a barrel, and prices briefly crossed $70 in intraday trading before paring gains.
U.S. President Donald Trump is set to review whether to waive or reimpose sanctions on Iran this week, a decision that has implications on Iran's oil exports.
"It will be very important for the oil market to see what he does with Iran considering that in the past sanctions regime a large portion of exports was disrupted," said Giovanni Staunovo, commodity analyst at UBS Wealth Management.
The review comes after Iran has faced two weeks of antigovernment protests, after its economy didn't benefit to the extent expected from the lifting of international sanctions two years ago.
Mr. Staunovo said oil was rising on a combination of factors including geopolitical risks, falling output in Venezuela and shrinking inventories in the U.S.
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On Wednesday, the U.S. Energy Information Administration reported that crude oil stocks fell by almost 5 million barrels in the week ended Jan. 5.
"We've been on a very, very bullish inventory trend," said Kyle Cooper, a consultant with ION Energy Group.
Concerns over supply disruptions has grown as the oil market has shown signs of tightening, particularly as inventory levels have declined.
Meanwhile, strong economic growth has encouraged oil bulls on the prospects for oil demand in 2018 and 2019.
"While certainly I expect U.S. oil production to keep rising at a very rapid pace, for now demand's still pretty good. Clearly there still seems to be a solid global economy demanding more oil," Mr. Cooper said.
Analysts said that the higher oil price could incentivize cheating by members of the Organization of the Petroleum Exporting Countries, which agreed late last year to extend production cuts through 2018 to drain global stocks. The pact included some non-OPEC countries such as Russia.
"The debate has now switched to, 'Has the market run up too fast, and will that encourage cheating from OPEC and non-OPEC producers or greater increases in shale than expected?'" said Andy Lipow, president of Lipow Oil Associates in Houston.
Gasoline futures rose 0.2% to $1.8370 a gallon and diesel futures fell 0.2% to $2.0767 a gallon.
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(END) Dow Jones Newswires
January 11, 2018 16:11 ET (21:11 GMT)