Updated from 2:26 p.m. EDTOil futures rebounded Tuesday after three straight days of losses, boosted by Iran's refusal to stop enriching uranium. Light, sweet crude picked up 55 cents to settle at $74.16 a barrel. Wholesale gasoline, which often trades parallel to oil, ended trading up 1 cent to $2.19 a gallon. "The Iranian nation will not retreat one iota on its way to realizing all of its rights, including complete nuclear rights and employing the capacities to produce nuclear fuel," Iran's President Mahmoud Ahmadinejad said, according to a Reuters report. His comments came as Iranian and European Union officials met to discuss an incentives proposal meant to persuade Iran to cut uranium enrichment. The West had hoped to receive some kind of response from Iran ahead of the Group of Eight meeting in Russia this Saturday. However, Iran's chief nuclear negotiator, Ali Larijani, dashed those hopes, saying the nation wouldn't be rushed into a decision and would respond in late August. The West cobbled together proposals for Iran including trade incentives and assistance building a nuclear reactor for civilian purposes. Earlier this year, Iran, the world's fourth-largest crude producer, restarted uranium enrichment after a two-year hiatus ostensibly to produce more electricity for its growing population. However, the West suspects the move is a ruse to develop nuclear weapons. A projected decline in oil stockpiles as refiners ramped up production to make more gasoline was also lending support to higher prices. In a Bloomberg poll of analysts, refining capacity was expected to climb half a percentage point last week, up from 93.1%. Inventories of oil were projected to decline by 1.2 million barrels. Traders will be focusing on the Energy Department's weekly update at 10:30 a.m. EDT Wednesday because it tracks the week including the July 4 holiday. Gasoline consumption is expected to rise as more Americans took to the roads. Stockpiles likely dropped by 125,000 barrels, the smallest decline since March, from 213.1 million barrels.
This summer, regular gasoline prices are expected to average $2.88 a gallon, an increase of 12 cents over the U.S. Energy Department's forecast last month. Gasoline is expected to be 51 cents higher than last summer, according to the agency's short-term energy outlook released Tuesday. Higher demand and slim supplies are boosting prices. The average price for regular gasoline climbed 4 cents to $2.97 a gallon, the second-highest price since the U.S. Energy Department started tracking prices in 1990. Immediately after Hurricane Katrina shut down much of the Gulf Coast's energy industry, retail gasoline prices surged to $3.07 a gallon. Production cuts in Nigeria, vast inflows of money into commodities and concerns supplies may be cut from Iran have driven oil prices up 20% this year. Despite higher prices, though, growth in demand this year is forecast to remain robust at 1.6 million barrels a day. Oil prices will rise with demand, with the U.S. oil benchmark, West Texas Intermediate crude, climbing to an average of $69.13 a barrel, up from $68.11 in last month's forecast. Last year, the average price was $56.49 a barrel. Forecasts of warmer-than-usual weather for much of the country over the next two weeks propped up natural gas prices by 2 cents to $5.63 per million British thermal units. Natural gas is used by utilities to generate electricity. Distillates, which include heating oil and jet fuel, probably jumped by 1.5 million barrels thanks to lower demand. Despite the supply glut, heating oil added 4 cents to $2.01 a gallon. In the equity markets, shares of exploration, service and refining companies climbed. ExxonMobil ( XOM), Hess ( HES) and Marathon Oil ( MRO) were leading the gainers on the Amex Oil Index. Among oil service companies, Schlumberger ( SLB), Baker Hughes ( BHI) and Halliburton ( HAL) were higher.