Oil prices rose on Tuesday after OPEC signalled it is not interested in changing its current output despite looming US sanctions on Iranian crude exports. Equinor photo by Ole-Jørgen-Bratland.
Saudi Arabia comfortable with oil prices over $80/barrel
Oil prices rose by over 1 per cent on Tuesday after OPEC signalled it will not increase its production to compensate for reduced Iranian crude exports as the Trump administration’s sanctions on Iran impact the global crude market.
By 2 p.m., EDT, Brent crude prices were up 79 cents to $78.84/barrel and US West Texas Intermediate rose 69 cents to $69.60/barrel.
OPEC ministers along with representatives from non-cartel countries participating in the OPEC supply cut agreement will meet on Sunday to discuss compliance with the group’s output deal.
According to Reuters’ sources, there is no immediate action on production planned and producers are set to discuss how a previously agreed output increase would be shared.
And Bloomberg reported on Tuesday that unnamed Saudi sources say the kingdom is content with oil prices above $80/barrel, at least in the short term.
According to a Bloomberg report, while Saudi Arabia does not want to push oil prices over $80/barrel, it may be unavoidable due to the Trump administration’s sanctions on Iranian crude exports which are due to come into effect on November 4.
In prior Reuters reports, Saudi Arabia has said it would like to see oil prices stay between $70 and $80/barrel for now, in an effort to maximize its revenue while keeping a lid on prices until the US midterm elections.
Russia’s Energy Minister Alexander Novak said current oil prices are temporary and driven by the US sanctions. He believes oil prices will eventually settle at about $50/barrel.
Rick Perry, US Energy Secretary said in Moscow last week that he did not expect any price spikes once the November sanctions come into effect. He said he was confident about Saudi Arabia’s production.
Oil futures were also boosted by geopolitical risks on Tuesday after a Russian military plane was shot down over Syria by the Syrian military. All 15 personnel aboard the plane were killed.
Russia is blaming Israel for the incident saying it put its aircraft in the line of fire and said it had only a minute’s notice of the strike.
“This market remains highly reactive to such headlines given some apparent global oil supply tightening that is developing ahead of the official kick-off to the Iranian oil sanctions,” Reuters reports Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Oil prices rose despite increasing trade tensions between the United States and China after Beijing retaliated against President Donald Trump’s imposition of 10 per cent tariffs on about $200 billion in Chinese goods on Monday.
On Tuesday, China announced tariffs between 5 and 10 per cent on$60 billion of US goods. The newest round of tariffs will be in place on Sept. 24.
The tariffs are expected to impact economic activity in the US and China and could slow demand for crude as less fuel is needed to produce and move goods for trade.
Later on Tuesday, the American Petroleum Institute will release it US crude stock data. Analysts expect US oil inventories will fall for a fifth straight week. Data from the US Energy Information Administration will be released on Wednesday morning.
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