Oil jumped 2 percent on Wednesday as refinery problems in the United States added to gasoline supply concerns ahead of the summer driving season. US light crude prices settled up $1.44 at $72.13 a barrel and gasoline futures gained more than 12 cents to $2.17 a gallon. Brent crude in London rose $1.36 to $72.44 a barrel.
Problems at Valero's Texas City, Texas, refinery and ConocoPhillips' Bayway plant in New Jersey pushed oil into positive ground after prices fell when weekly US inventory data showed a build in gasoline inventories last week.
Gasoline stocks in the United States, the world's biggest gas guzzler, are a major concern for oil markets ahead of the summer driving season when demand peaks.
US gasoline inventories rose 2.4 million barrels, the Energy Information Administration (EIA) said, double the increase analysts expected, while demand for the fuel in the past four weeks fell 0.1 percent from a year ago.
The increase in gasoline inventories follows a surprise boost in the previous EIA report, and some analysts say drivers may be tweaking driving habits to adjust to higher prices.
"Gasoline demand is still weak," said Jim Ritterbusch, president of Ritterbusch and Associates. "We're showing negligible growth since the beginning of this year. This is a big deal and this market will have to contend with that."
Despite the build in gasoline, the EIA said it was worried about the level of US reformulated blendstock for oxygenate blending (RBOB) inventories available to make clean-burning gasoline for the summer. RBOB is essentially incomplete reformulated gasoline, lacking only the addition of an oxygenate component.
"RBOB inventories are now increasing, but remain an area of concern with only weeks to go before the start of the peak driving season that runs from Memorial Day through Labour Day," the EIA said in its weekly review of the oil market.
Oil held above $70 earlier on Wednesday, building on the previous day's rally after a letter from Iran's president to US President George W. Bush failed to break a diplomatic impasse in the row over the Opec member's nuclear work.
"The statements from the US administration that essentially dismissed the letter from Iran were bullish by reinforcing the message that any solution was weeks or months or years away," said Deborah White of SG CIB in Paris.
Worries that the dispute over Iran's nuclear work could disrupt oil supplies come on top of an actual loss from Nigeria, where raids by militants have cut output by almost a quarter.
US crude hit a record high of $75.35 last month because of concern over Iran, supply losses in Nigeria and increased buying of commodities by investment funds seeking to beat returns available in equities and bonds.
Copper soared above $8,000 a tonne for the first time on Wednesday as supply worries and strong demand triggered a buying spree by funds. Platinum reached a new record and gold jumped to a 25-year high.