Oil steady as Saudi tensions balance demand outlook

By Christopher Johnson

LONDON (Reuters) – Oil prices steadied on Monday as tension over the disappearance of a prominent Saudi journalist stoked supply worries, balancing concerns over the long-term demand outlook.

Benchmark jumped by $1.49 a barrel to a high of $81.92 before giving up its gains to trade around $80.38, down 5 cents, by 1345 GMT. was down 5 cents at $71.29.

“Growing tensions over the disappearance of journalist Jamal Khashoggi at the Saudi consulate in Istanbul has proved supportive,” said ING commodities strategist Warren Patterson.

Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul.

U.S. President Donald Trump threatened “severe punishment” if it is found that Khashoggi was killed in the consulate.

Saudi Arabia said it would retaliate to any action against it over the Khashoggi case, state news agency SPA reported on Sunday, quoting an official source.

“This has raised concerns that the Saudis may use oil as a tool for retaliation if any sanctions or other action is taken against it,” Patterson said.

But analysts said it was difficult to imagine Saudi Arabia taking action that would greatly affect world oil supply.

“So far the oil market is withstanding the verbal war and though prices are slightly higher … they are a good $5 below the peak last week,” said City Index analyst Fiona Cincotta.

Exerting downward pressure on prices, Friday’s monthly report from the International Energy Agency said the market looked “adequately supplied for now” and cut its forecasts for world oil demand growth this year and next. [IEA/M]

OPEC, Russia and other oil producers, such as U.S. shale companies, had increased production sharply since May, the IEA said, raising world crude output by 1.4 million barrels per day (bpd).

“These (factors) are very bearish for oil prices,” said Commerzbank (DE:) commodities analyst Carsten Fritsch.

The secretary general of the Organization of the Petroleum Exporting Countries last week said that the group saw the oil market as well supplied and that it was wary of creating a glut next year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.