Oil prices edge up as supply concerns outweigh U.S. stockpile gains

Oil prices inched up on Wednesday as concerns that producers may not be able to cover a shortfall in supply once U.S. sanctions on Iran kick in outweighed a gain in U.S. stockpiles.

Brent crude futures were up 16 cents at $79.19 per barrel at 0658 GMT, after rising 1.3 percent in the previous session.

U.S. West Texas Intermediate (WTI) crude futures were up 20 cents, or 0.29 percent, at $70.05 a barrel, having climbed 1.4 percent the day before.

Prices rose on Tuesday amid media reports that Saudi Arabia, the world’s largest oil exporter, was comfortable with prices climbing above $80 a barrel.

Reuters reported on Sept. 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections.

The Organization of the Petroleum Exporting Countries (OPEC)and non-OPEC producers, including the world’s biggest producer Russia, are meeting on Sept. 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian oil supply. 

U.S. sanctions affecting Iran’s petroleum sector will come into force from Nov. 4, though many buyers have already curbed their purchases, raising questions about how the market will make up the lost supply.

“(Traders took the Saudi comments) as a sign that they (Saudi Arabia) won’t be aggressively responding to the rise in prices with supply increases of its own,” ANZ bank said in a note on Wednesday.

“It may also suggest they don’t have the ability to make up for the losses that are already stemming from impending U.S. sanctions on Iran.”

OPEC and non-OPEC producers Russia started withholding oil supplies in 2017 to end a global glut and prop up prices.