Oil reserves nearly 80 dollars while Saudi Arabia plans to increase its production

LONDON (Reuters) – Oil fluctuated around $ 80 a barrel on Monday, following a diplomatic crisis between Saudi Arabia and the West, barely two weeks before US sanctions do not come to choke the supplies of Iranian crude.

Saudi Energy Minister Khalid al-Falih told the Russian news agency TASS that his country did not intend to lift an oil embargo similar to that of 1973, but rather aimed at increase production to compensate for supply losses elsewhere, as in Iran.

Several US lawmakers have suggested imposing sanctions on Saudi Arabia for the assassination of Saudi journalist Jamal Khashoggi, while the kingdom, the world's largest oil exporter, has committed to retaliate against any sanction by "greater measures".

Falih said Saudi Arabia would soon increase production to 10 million barrels a day, up from 11.7 million barrels a day. He added that Riyadh had the capacity to increase production to 12 million bpd.

"International pressure on Saudi leaders remains in place, as is the possibility of sanctions," Commerzbank said in a daily note.

Brent LCoC1 futures were up 16 cents at 11.9 GMT, to reach $ 79.94 per barrel, while US CLc1 futures contracts rose 10 cents to $ 69.22. the barrel.

"Politics is coming in and maybe that's what the Saudis will do, but in terms of supply / demand balance next year, it's not justified for them to increase production." said Tamas Varga, strategist of PVM Oil Associates.

US sanctions against the Iranian oil sector start on Nov. 4, and analysts say supply could cost as much as 1.5 million bpd.

"The big unknown is the amount of Iranian oil that will be out of market and we'll know it in about a month. We will then have a better idea of ​​what we can expect for the first quarter of next year, "said Varga.

The Organization of the Petroleum Exporting Countries decided in June to strengthen supply to offset the expected disruption of Iranian exports.

An internal document considered by Reuters, however, suggests that OPEC is struggling to add barrels, as the increase in Saudi supply is offset by declines elsewhere.

The outlook for demand next year is deteriorating.

OPEC estimates that demand for its crude oil will fall to an average of 31.8 million bpd next year, compared to an average of 32.8 million bpd this year.

"The total impact of the US-China trade war will affect the markets in 2019 and could be a significant drag on oil demand next year," said the NBD Emirates bank in a note.