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NEW YORK: Oil prices gained about 3% on Thursday as robust U.S. fuel consumption data and an expected drop in Russian supply later in the year offset concerns that slowing economic growth could undercut demand.

Brent futures rose $2.47, or 2.6%, to $96.12 a barrel by 11:41 a.m. EDT (1541 GMT), while U.S. West Texas Intermediate (WTI) crude rose $2.16, or 2.5%, to $90.27.

Prices rose more than 1% during the previous session, although Brent at one point fell to its lowest since February, as signs of a slowdown mounted in some places.

The oil complex is “advancing off the big (U.S.) crude stock draw, increased product demand and (the) apparent stall in Iranian nuclear negotiations,” analysts at energy consulting firm Ritterbusch and Associates said in a note.

U.S. crude stocks fell by 7.1 million barrels in the week to Aug. 12, Energy Information Administration (EIA) data showed, against expectations for a 275,000-barrel drop, as exports hit a record 5 million barrels per day (bpd).

Bans by the European Union on Russian exports could dramatically tighten supply when curbs to seaborne crude and products imports into the bloc ramp up in coming months and drive up prices, analysts warn.

US oil may retest support at $85.73

“The EU embargoes will force Russia to shut in around 1.6 million (bpd) of output by year-end, rising to 2 million bpd in 2023,” consultancy BCA research said in a note. “EU embargoes on Russian oil imports will significantly tighten markets and lift Brent to $119 a barrel by year-end.”

Russia, however, forecasts rising output and exports until the end of 2025, an economy ministry document seen by Reuters showed, saying revenue from energy exports will rise 38% this year, partly due to higher oil export volumes.

More cautious

Preventing oil prices from rising too high was the possibility of increased supplies from Iran and worries that demand could drop if China imposes more lockdowns to stop the spread of COVID, along with slowing economic growth as central banks raise interest rates to control runaway inflation.

The market is awaiting developments from talks to revive Iran’s 2015 nuclear deal with world powers, which could lead to a roughly 1 million bpd boost in Iranian oil exports.

“We may be seeing traders taking a more cautious approach considering how close a decision on the Iran nuclear deal appears to be,” said Craig Erlam, senior market analyst at OANDA. “There remains plenty of doubt that it will get over the line but if it does, that could be the catalyst for another move lower.”

Open interest in U.S. futures on the New York Mercantile Exchange fell on Wednesday to its lowest since January 2015 for a third day in a row as investors cut back on risky assets like commodities, worried central banks will keep raising rates.

San Francisco Federal Reserve President Mary Daly said raising rates by either 50 or 75 basis points in September would be a “reasonable” way to get short-term borrowing costs where they need to be to bring inflation down.

The U.S. dollar index, meanwhile, hit a three-week high on Thursday.

A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

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