Oil rises as Saudi says it is comfortable with higher prices

Kenny Grant
September 22, 2018

US West Texas Intermediate (WTI) crude fell 0.20%, or 14 cents, to US$69.71 a barrel.

But supporting crude futures were potential supply cuts from US sanctions on Iran.

Stockpiles of distillate fuels, which include diesel and heating oil, rose by 1.5 million barrels, the API data showed, compared with expectations for a 651,000-barrel gain. Official inventory data from the US Energy Information Administration will be released on Wednesday. OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase.

Saudi Arabia self-reported to OPEC that its production in August increased by 124,000 bpd from the July self-reported figure of 10.29 million bpd, to 10.412 million bpd in August.

Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was now comfortable with prices above US$80 per barrel, at least for the short term.

Unilateral U.S. sanctions on oil sales by Iran, OPEC's third-biggest supplier, take effect on November 4.

OPEC Secretary General Mohammad Barkindo said on Tuesday that OPEC and non-OPEC countries aim to agree a framework for long-term cooperation by December, when the oil producers plan to meet in Vienna.

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Crude posted a third weekly advance out of four as Iranian sanctions take center stage, with investors eyeing the impact on supply.

Oil futures also drew support from geopolitical risk on Tuesday.

Oil markets slipped on Tuesday as the latest escalation in the Sino-US trade war clouded the outlook for crude demand from the two countries, the world's top crude consumers.

Crude oil prices peaked at a near-term high of with WTI tapping into 70.40 on Tuesday, but was unable to make a challenge of last week's high of 71.25 after USA oil inventories showed yet another surprise build-up in their barrel counts yesterday. The move was in retaliation for President Donald Trump's planned levies on $200 billion worth of Chinese goods.

The head of OPEC says the oil cartel must stick together for the good of the global economy as Iran faces renewed US sanctions.

The rally could stop and prices could turn lower if someone counters with concerns over future demand in the wake of the announcement of additional tariffs on China by the United States.

US stock indexes broadly fell yesterday, weighing on oil futures, on expectations that Trump would go ahead with the new tariffs and that Beijing would retaliate.

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