Seoul: Oil extended gains above $71 (Dh260.5) a barrel after American crude inventories declined, while Goldman Sachs Group Inc. said market fundamentals are increasingly bullish on supply risks from OPEC’s third-largest producer Iran.

Futures rose as much as 0.5 per cent in New York, after gaining 1.1 per cent in the past three sessions. Ahead of the summer driving season, US crude stockpiles slipped for a second week, a government tally showed. Meanwhile, Goldman said even America’s surging shale production won’t be able to replace Iran’s potential drop in oil shipments after the US scrapped a 2015 nuclear accord between the Arabian Gulf state and world powers.

Crude has rallied this month to the highest level in more than three years after US. President Donald Trump said he will re-impose sanctions on the Islamic republic that would restrict its oil exports. While the International Energy Agency said a global glut has been finally eliminated thanks to output curbs by Opec, it still warned recent high prices will put a brake on consumption and reduce forecasts for global oil demand growth.

“Declining crude and fuel stockpiles proves that demand remains healthy in the US,” Ahn Yea Ha, a commodities analyst at Kiwoom Securities Co., said by phone from Seoul. “Geopolitical uncertainties are keeping prices above $70 a barrel and until tensions ease and there’s more clarity, we may continue to see oil trading in the current range below $72.”

West Texas Intermediate crude for June delivery traded at $71.74 a barrel on the New York Mercantile Exchange, up 25 cents, at 1pm. Seoul time. The contract climbed 18 cents, or 0.3 per cent, to $71.49 on Wednesday. Total volume traded was about 9 per cent below the 100-day average.

Brent for July settlement was up 13 cents at $79.41 a barrel on the London-based ICE Futures Europe exchange, after adding 1.1 per cent on Wednesday. The global benchmark crude traded at a $7.63 premium to WTI for July.

Futures for September delivery on the Shanghai International Energy Exchange gained 2.4 per cent to 484.3 yuan a barrel, rising for a third day.

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Nationwide crude inventories fell 1.4 million barrels last week, while domestic production rose to 10.7 million barrels a day, the Energy Information Administration said on Wednesday. The spectre of surging US output, which has topped 10 million barrels a day every week since early February, continues to place a cap on prices and undermine OPEC’s output cuts. Gasoline stockpiles also shrank last week by 3.79 million barrels, the EIA reported.

Members of the Organisation of Petroleum Exporting Countries, including Saudi Arabia, Kuwait and the United Arab Emirates, said they have enough capacity to fill in any supply gap if renewed sanctions curtail Iran’s exports. Still, Goldman Sachs said the group won’t proactively replace the lost barrels, given its current narrative that the market isn’t fully rebalanced.

Even the US, where supplies are growing significantly, won’t be able to offset Iran’s shipments because shale producers are facing “growing pains” as record production has caused a bottleneck in the nation’s pipelines, Goldman analysts including Jeffrey Currie wrote in a May 16 note.