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Asia is set to import record volumes of crude from West Africa in 2012 as increasing supplies of high quality crude drive down export prices and many buyers seek an alternative to Iranian barrels. - File photo

NEW YORK: Oil prices jumped 2 per cent on Tuesday and were up for the third straight session due to falling North Sea output, support for more bond buying by the US Federal Reserve and Middle East tensions.

Crude oil and US refined products futures moved above key moving averages to add technical support to the day's bullish sentiment.

Boston Federal Reserve Bank President Eric Rosengren's statements in interviews saying that the Fed should start buying Treasury and mortgage-backed securities and continue doing so until the economy was back to full strength revived investor hopes for more stimulus.

Rosengren's remarks supported investor expectations that the Fed may yet act even though he is not a voting member this year on the Fed's policy-setting committee.

North Sea crude oil output is set to fall to a record low of 720,000 barrels per day (bpd) in September, adding to supply tightness with the European Union's embargo on Iranian oil now in its second month.

“The news about the record low North Sea loadings got Brent going early and it has lifted everything else,” said John Kilduff, partner at Again Capital LLC in New York.

“Also the Boston Federal Reserve president saying he is in favor of more bond buying revived hopes about more stimulus from the Fed,” Kilduff added.

Syria's embattled President Bashar al-Assad won a pledge of support on from Iran as his forces tried to choke off rebels in the northern city of Aleppo. Shown on television meeting a senior Iranian official, it was Assad's first broadcast appearance in two weeks.

Brent September crude rose $2.75 to $112.30 a barrel by 1:41 p.m. EDT (1741 GMT), surging past the front-month 200-day moving average of $111.28. Tuesday's $112.35 intraday peak is the highest since Brent reached $112.67 on May 15.

US September crude was up $1.85 at $94.05 a barrel, after eclipsing the 100-day moving average of $93.47 and having reached $94.09, highest price since mid-May.

Brent's premium to US crude pushed back above $18 a barrel.

The North Sea production problems and potential threats to supply in the Middle East lifted the premium of Brent's front-month to the nearby contract above $1.60 a barrel.

US RBOB gasoline and heating oil both rallied above $3 a gallon, the first time since May. Gasoline had already shot above its 100-day moving average of $2.9661 and heating oil above its 200-day moving average of $2.9921.

With a month to go in the US summer driving season, gasoline rallied in the wake of a fire at Chevron Corp's 245,000-barrel-per-day (bpd) refinery in Richmond, California, the state's second largest.

STIMULUS WATCH

Oil's rally came as world stocks rose to a new three-month high and the euro gained versus the dollar as investors drew encouragement from signs that Europe is edging toward resolving its debt crisis even as the economic impact in the region worsens.

US equities also rallied, with the S&P 500 above 1,400 for the first time since early May, bolstered by expectations the ECB will act soon to contain the bloc's credit crisis.

EYES ON SUPPLY

The US Energy Information Administration lowered its 2012 and 2013 forecasts for crude oil production from non-OPEC countries in the EIA's monthly report and raised its demand outlook for those years.

Asia is set to import record volumes of crude from West Africa in 2012 as increasing supplies of high quality crude drive down export prices and many buyers seek an alternative to Iranian barrels.

Ahead of weekly snapshots of US oil inventories, crude stocks were expected to have dipped last week, with gasoline stocks dropping also, according to Reuters survey of analysts on Monday.

The report from industry group the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday.


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