Oil dips as Saudi Arabia pledges to play 'responsible role' in market

Daniel Fowler
October 23, 2018

Oil edged above US$80 a barrel on Monday, lifted by nervousness over a worsening diplomatic crisis between Saudi Arabia and the West, just two weeks before United States sanctions potentially choke off Iranian crude supplies.

"There is no intention", Saudi Arabia's Minister of Energy Khalid al-Falih told TASS news agency when asked whether the kingdom could impose the 1973-style oil embargo.

Harsh, but with the deal maker in the White House, if the USA has a reason to squeeze Saudi Arabia to bump up production and keep a lid/lower crude oil prices, this is the time.

The last close below the 200 day MA was in October 2017.

Oil traded at its lowest in more than a month after Saudi Arabia reiterated plans to raise output and as tumbling equities weakened sentiment.

"We will decide if there are any disruptions from supply, especially with the Iran sanctions looming", Falih said.

While Saudi Arabia is intent on making up for lost barrels, the outlook for demand next year is deteriorating.

"The rise in oil prices has slowed down the economic growth of many consumer countries, hitting the global economy hard", Zangeneh added.

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"As long as America targets Iran, one of the biggest crude producers, with sanctions, the volatility in the oil market will continue", Zageneh said.

OPEC itself estimates demand for its crude will fall to an average of 31.8 million bpd next year, from an average 32.8 million bpd this year. USA crude futures fell 15 cents to $68.97 a barrel.

USA crude inventories were expected to have risen for the fifth straight week last week, according to a Reuters poll ahead of weekly data from the American Petroleum Institute (API) at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration (EIA) report on Wednesday morning.

Saudi Arabia's Energy Minister says Riyadh can not compensate for possible oil disappearance from global markets in the wake of U.S. sanctions on Iran.

Oil demand to reach 120mln b/d in 30 years.

"Politics are coming into the picture and maybe this is what (the Saudis) will do, but as far as next year's supply/demand balance is concerned, it's not justified for them to increase production", PVM Oil Associates strategist Tamas Varga said.

The Schork Report editor Stephen Schork on USA oil production and why he believes that the market has adjusted to the Iran sanctions.

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