Oil prices fall as Saudi Arabia pledges to play 'responsible role' in market
SINGAPORE - Oil prices fell on Tuesday after Saudi Arabia pledged to play a "responsible role" in energy markets, although sentiment remained nervous in the run-up to U.S. sanctions against Iran's crude exports that start next month.
Front-month Brent crude oil futures were at $79.52 a barrel at 0318 GMT, down 31 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $69.16 a barrel, dropping 20 cents, or 0.3 percent, from their last settlement.
U.S. sanctions against Iran's oil exports are due to kick off on Nov. 4, with Washington pressuring governments and companies worldwide to fall in line and cut imports from the Middle Eastern nation.
Top crude oil exporter Saudi Arabia has pledged to keep markets supplied despite its increasing isolation over the killing of Saudi journalist Jamal Khashoggi.
There has been concern that just as markets tighten on the back of the U.S. sanctions against Iran, Saudi Arabia could cut crude supply in retaliation for potential sanctions against it over the Khashoggi killing.
Trying to dismiss such worries, Saudi energy minister Khalid al-Falih said on Monday that "there is no intention" for such action, and that Saudi Arabia would play a "constructive and responsible role" in world energy markets.
"Iran oil sanctions and Jamal Khashoggi's saga are clear examples of the indisputable role geopolitics play in oil, and this is expected to impact oil price and volatility at a time when markets are just about balanced," J.P. Morgan said in a note to clients.
"We have just upgraded our price forecasts for 2019 Brent by $20.5 per barrel to $83.5 per barrel," the U.S. bank said, adding that this "bullish argument is strongly driven by tighter supply due to Iranian sanctions and declining spare capacity".
But not everyone is as bullish. Shipping brokerage Eastport on Tuesday said crude prices were "widely expected to decline in coming months, as rising production in the U.S. offsets increasing global demand".
U.S. crude oil production has climbed by almost a third since mid-2016 to around 11 million barrels per day, and rising drilling activity points to further increases.
Reflecting a cautious outlook, traders have been curbing their exposure to oil markets by shutting long positions in crude futures, with fund managers cutting their combined positions by a total of 187 million barrels in the last three weeks, according to exchange and regulatory data.