Brent oil traded near the highest level in a week after Saudi Arabia was said to be content with the global benchmark crude breaking above USD80 a barrel.
Futures in London were little changed near $79 a barrel after a 1.3 percent gain Tuesday. The world’s biggest crude exporter believes it may no longer be possible to avoid higher prices as U.S. sanctions on Iranian exports crimp supply, according to people familiar with Saudi Arabia’s view. Meanwhile, an industry report Tuesday showed U.S. crude stockpiles increased 1.25 million barrels last week, defying expectations for a decline ahead of government data.
Prices have traded mostly below $80 over the past few months on fears trade tensions between the U.S. and China could damp global demand. Still, concerns remain that supplies could tighten as a November deadline for American sanctions on Iranian oil approaches. Investors are also turning their focus to Sunday’s OPEC meeting with allies for clues on whether the group will boost output again after President Donald Trump called on the cartel to rein in prices.
“Investors are currently assessing the Saudis’ mixed message on oil prices versus its earlier pledge to increase output,” said Hong Sungki, a commodities trader at NH Investment & Securities Co. in Seoul. “But U.S. pressure will come into play and it’s more likely that OPEC producers and allies will decide on a production boost later this week.”
Prices in New York and London both rose as much as 2.2 percent in the previous session after Saudi Arabia was said to be comfortable with higher crude prices, at least in the short term, as the market adjusts to the loss of Iranian supplies. Oil exports from the Persian Gulf nation have plunged about 35 percent since April, the month before Trump exited from the diplomatic deal with Tehran and announced new oil sanctions.
While Iran’s exports have moved in Trump’s favor, the president faces the predicament of wanting oil prices to come down before U.S. midterm elections on Nov. 6. Trump sent several tweets stating that prices are too high after Brent rose to a three-year high in May. Saudi Arabia, Russia and other major producers are scheduled to meet in Algiers on Sunday to review their strategy after the group agreed to increase production in June.
Meanwhile, American Petroleum Institute data showed that crude stockpiles increased last week, while those in the storage hub at Cushing in Oklahoma fell. A Bloomberg survey of analysts forecasts a 2.5-million-barrel decline in nationwide inventories. MDT/Bloomberg
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