Oil prices were up early on Tuesday morning amid reports that Saudi Arabia would be comfortable letting oil prices rise above $80 a barrel and OPEC may not be rushing into further production boost commitments after the one they agreed upon in June.
At 08:02 a.m. EDT on Tuesday, WTI Crude was up 0.80 percent at $69.54, while Brent Crude was trading up 0.79 percent at $78.71.
The Saudis are said to be comfortable with the current oil prices, and even with Brent Crude rising past $80 a barrel, at least in the short term, as the oil market and global supply will be adjusting to significantly reduced Iranian oil exports, Bloomberg reported on Tuesday, citing people familiar with Saudi Arabia's thinking.
OPEC and its Russia-led non-OPEC partners in the production cut deal are meeting in Algiers this weekend to review the state of the oil market. The cartel and its allies will discuss how to divvy up the 1 million bpd production increase they pledged in June, but no further immediate action is planned, OPEC sources have told Reuters.
Reports of Saudi Arabia being okay with letting Brent Crude above $80 now has the market wondering if KSA will lift its production further in the coming months to offset supply losses from Iran, whose oil exports have already started to fall noticeably.
"It casts doubts on whether Saudi Arabia will increase output to compensate for the loss of Iranian crude once sanctions come into effect," Carsten Fritsch, an analyst at Commerzbank, told Reuters, commenting on the reported Saudi thinking. Related: The Age Of Electrification Has Arrived
Earlier this month, sources at OPEC and the industry told Reuters that Saudi Arabia was looking to manage the oil market in a way that would keep oil prices in the $70 to $80 band for the time being, as the Kingdom wants a floor under prices to monetize oil exports and at the same time keep a ceiling until at least the U.S. mid-term elections in November.
Early on Tuesday, the Saudi signal that they could be comfortable with $80-plus Brent Crude price was trumping any trade war fears, after U.S. President Donald Trump slapped additional tariffs of around US$200 billion worth of U.S. imports from China, effective September 24, and threatened to impose tariffs on US$267 billion of additional imports should China retaliate.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More