Global oil markets extended gains Tuesday, lifting both U.S. crude and domestic gas prices to six month highs, as investors looked to whether Saudi Arabia can fill the supply gap left by sanctions on the sale of Iranian crude that could remove 1.3 million barrels of exports each day.

Saudi Arabia says it "fully supports" the U.S. State Department's decision to remove waivers that had allowed eight countries -- including China, India and Japan -- to continue buying Iranian crude despite U.S. sanctions on Tehran. In a statement Tuesday, Saudi Arabia called the move a "necessary step to make the Iranian regime stop its destabilising policies and sponsoring terrorism around the world".

President Donald Trump has said he expects Riyadh to increase output in order to plug the gap in global supply if Iran's exports are reduced to zero, but Saudi Energy Minister Khalid al-Falih would only say the Kingdom was ""monitoring the oil market developments" and that it would "coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance."

Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 50 cents higher from their Monday close in New York and changing hands at $74.54 per barrel, the highest since November 1, while WTI contracts for the same month were seen 51 cents higher at $66.06 per barrel.

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With the U.S. summer driving season approaching, however, and domestic gas prices creeping to $2.85 per gallon, according to, an extended surge in crude will add further upward pressure on consumers who are already seeing modest inflationary pressures and suddenly stagnant wage growth. 

Saudi Arabia's reaction will also be complicated by its role in orchestrating last year's OPEC production cuts, which, along with non-member allies such as Russia, are taking 1.2 million barrels from the market each day. The cartel is set to revisit that agreement during its next general meeting in Vienna in June.

"Saudi Arabia has plenty of room to increase output and still comply with the production cut deal. Under the deal, the Kingdom should be producing around 10.2 million barrels per day, yet over the last couple of months the Saudis have been pumping around 9.8 million, said ING head of commodity strategy Warren Patterson. "As we head into summer though, it's expected that domestic output will increase."

"Given that the US will not extend waivers, it will likely be increasingly difficult for OPEC+ to justify extending its current production cut deal into the second half of this year," he added.