Crude oil futures were higher during mid-morning trade in Asia Tuesday amid supply concerns stemming from the growing tension between the US and Saudi Arabia, while an expected rise in US crude inventory data capped gain. At 10:25 am Singapore time (0225 GMT), December ICE Brent crude futures were up 34 cents/b (0.42%) from Monday’s settle at $81.12/b, while the NYMEX November light sweet crude contract was 21 cents/b (0.29%) higher at $71.99/b.
“The latest price rise is due to tensions between the US and Saudi Arabia over the unexplained disappearance of a regime-critical journalist nearly two weeks ago in the Saudi Arabian consulate in Istanbul,” Commerzbank analysts said in a note. US President Donald Trump has promised “severe punishment” if Saudi Arabia is found to be responsible for the disappearance of journalist Jamal Khashoggi, prompting a threat of “greater action” from the Saudis. The potential impact of the spat on Saudi crude exports adds to pressure on supply stemming from the looming US sanctions on Iran.
“The elevated uncertainty around this politically-engineered market tightening is due to the potential timing or size mismatch of the Iran declines and new capacity coming online, as well as the uncertain stance of the US administration on waivers,” Goldman Sachs analysts said in a note. However any US action on Saudi Arabia would likely target individuals, not crude oil or other trade flows, according to US sanctions experts. Price gains were also capped Tuesday by an expected build in US crude inventories, analysts said. Analysts surveyed Monday by S&P Global Platts expected US commercial crude inventories to have risen for a fourth straight week to around 411.8 million barrels on October 12, a nine-month high.