Crude climbed amid indications that Saudi Arabia is just fine with oil prices pushing past $80 a barrel.
Futures in New York climbed 1.4 per cent on Tuesday. The world’s biggest crude exporter is said to be comfortable with Brent prices rising as markets adjust to the loss of Iranian supply due to US-imposed sanctions, with oil exports from the nation plunging about 35 per cent since April. In the US, crude inventories are seen declining for a fifth straight week.
"We’re seeing spare capacity globally heading toward critical levels as sanctions against Iran start biting," said Bart Melek, head of global strategy at TD Securities. "As countries like South Korea stop using crude from the Islamic Republic, Saudi Arabia is going to try and fill that gap and we will see less capacity in the global supply chain of crude."
Saudi Arabia, Russia and other major exporting countries are scheduled to meet Sunday in Algiers to review the oil market. As the market evaluates the impact of sanctions on Iran, a growing trade dispute between the US and China has the potential to weigh on demand. China said it will impose retaliatory tariffs against $60 billion of US goods, starting on 24 September. That follows an announcement from the US that it will impose a 10 per cent tariff on about $200 billion in Chinese goods next week.
West Texas Intermediate crude for October delivery advanced 94 cents to settle at $69.85 a barrel on the New York Mercantile Exchange.
Brent for November settlement advanced 98 cents to $79.03 on the ICE Futures Europe exchange. The global benchmark crude traded at a $9.44 premium to WTI for the same month.
US crude inventories likely fell 2.5 million barrels last week, according to a Bloomberg survey of analysts. Cushing, Oklahoma crude stockpiles likely fell 800,000 barrels last week, according to a forecast compiled by Bloomberg.
The American Petroleum Institute is scheduled to release its weekly count of stockpiles later Tuesday, followed by the US government’s tally on Wednesday.