NEW YORK: Oil prices climbed over 2 percent to a three-month high on Monday on tightening supply, rising US gasoline demand, hopes for Chinese stimulus measures and technical buying.

In addition, traders noted prices gained due to uncertainty in global markets related to Russia’s bombing of Ukraine’s grain export facilities and multiple missiles apparently launched by North Korea.

The price increase came even though the market expects more interest rate hikes from US and European central banks. Higher interest rates increase borrowing costs and can slow economic growth and reduce oil demand.

Brent futures rose $1.82, or 2.2%, to $82.89 a barrel by 11:56 a.m. EDT (1556 GMT), while US West Texas Intermediate (WTI) crude rose $1.96, or 2.5%, to $79.03.

That put both benchmarks on track for their highest closes since April 19 and pushed both contracts into technically overbought territory.

In addition, WTI futures were on track to close over the 200-day moving average, which has been a key point of technical resistance since August 2022.

Bob Yawger, director of energy futures at Mizuho, a bank, said a close above the 200-day moving average “generally stops out the (speculative) shorts (and) attracts traders looking for new entry points.”

Both crude benchmarks have climbed higher over the past four weeks with supplies expected to tighten due to cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, a group known as OPEC+.

Oil’s rise has reflected “tightening conditions as Saudi oil output cuts impact the market ... even as summer demand has been somewhat stronger for gasoline and jet fuel”, Citi Research said in a note.

Strong demand boosted US gasoline futures to their highest since October 2022, which caused the gasoline crack spread, a measure of refining profit margins, to rise to its highest since July 2022.

On the demand side, Euro zone business activity shrank much more than expected in July as demand in the bloc’s dominant services industry declined while factory output fell at the fastest pace since COVID-19 first took hold, a survey showed.

Investors have priced in quarter-point hikes from the US Federal Reserve and European Central Bank (ECB) this week, so the focus will be on what Fed Chair Jerome Powell and ECB President Christine Lagarde say about future rate increases.

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