Oil steady, supported by US stocks and supply concerns

23 September, 2018, 19:00 | Author: Natasha Holloway
  • On Tuesday Saudi Arabia said it was willing to see prices climb above $80 a barrel

The president also suggested it was unfair that OPEC raises prices when, "We protect the countries of the Middle East, they would not be safe for very long without us".

The US counts Saudi Arabia, OPEC's de facto leader, as a key ally and will be keen not to see a price surge ahead of the US midterm elections November 6, with Trump's Republican Party at risk of losing control of Congress.

Trump's criticism was directed primarily at Saudi Arabia, Opec's biggest producer, after the kingdom said it could tolerate oil prices above $80, at least in the short term, said Commerzbank commodities analyst Carsten Fritsch.

The report said that Saudi Arabia wants oil to stay between Dollars 70 and USD 80 a barrel for now, as the world's biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until USA congressional elections.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Thursday, continuing to be supported by lower U.S. crude oil inventories and global supply worries. USA light crude was down 9 cents at $71.03 a barrel after rising almost 2 percent on Wednesday.

"The last thing that he is going to want to have happen is diesel prices and oil prices hitting highs when people are going to the voting booth", Zahir said. Meanwhile, an industry report Tuesday showed US crude stockpiles increased 1.25 million barrels last week, defying expectations for a decline ahead of government data.

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Prices dipped as low at $70 in London in August, but have since risen as American sanctions began to significantly curb Iran's oil exports.

Despite the president's intervention, market sentiment remained fairly bullish with many traders and analysts expecting Brent to move above $80 soon. The commercial crude inventory is down about 3% compared with the five-year average for this time of year. Gasoline inventories fell by more than 1.7M barrels last week.

"Whether or not this (price) development was justified, it is a supply-side development and the market has reacted to it", PVM Oil Associates strategist Tamas Varga said, Reuters reported.

US sanctions affecting Iran's oil exports come into force on November 4.

Mostly, however, it's the uncertainty over how easily other producers can compensate for any lost supply.

One glaring absence from the Algiers proceedings will be Iranian oil minister Bijan Zanganeh, who has railed against Saudi Arabia and Russian Federation increasing production as Iran's market share is threatened.

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