Picture: REUTERS
Picture: REUTERS

Beijing — Oil prices were steady on Wednesday as concerns that producers would not be able to respond to a shortfall in supply once US sanctions on Iran are enacted outweighed a gain in stockpiles in the US, the world’s biggest oil user.

Brent crude futures were down nine US cents at $78.92 per barrel 3.34am GMT, after rising 1.3% in the previous session.

US West Texas Intermediate (WTI) crude futures were down 4c, or 0.1%, at $69.81 a barrel after climbing 1.4% in the previous session.

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 September 5 that Saudi Arabia wanted oil to stay between $70 and $80 a barrel to keep a balance between maximising revenue and keeping a lid on prices until US congressional elections.

Oil cartel OPEC and nonOPEC producers, including the world’s biggest producer Russia, are meeting on September 23 in Algiers, Algeria, to discuss how they can allocate supply increases within their quota framework to offset the loss of Iranian oil supply.

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

Traders took the Saudi comments "as a sign that [Saudi Arabia] won’t be aggressively responding to the rise in prices with supply increases of its own," said ANZ bank 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 US. sanctions on Iran."

Opec and nonOpec producers Russia started withholding oil supplies in 2017 to end a global glut and prop up prices.

The producer group said in June that it would agree to some supply increases starting in July, though the specific targets were not announced at the time.

There are signs, however, that Saudi Arabian exports did not increase in July. The country’s oil exports fell to 7.12-million barrels per day (bpd) in August from 7.24-million bpd, according to figures from the Joint Organisations Data Initiative.

The supply concerns outweighed an increase in oil inventories in the US reported late on Tuesday.

US crude inventories rose by 1.2-million barrels to 397.1-million in the week to September 14, according to the American Petroleum Institute (API).

Stockpile of distillate fuels, which include diesel and heating oil, rose by 1.5-million barrels, the API data showed, Official inventory data from the US Energy Information Administration will be released later on Wednesday.

"Traders are ignoring today’s API data given while focusing on news from the Middle East," Stephen Innes, head of Trading for APAC at Oanda wrote in a note. "Overnight chatter suggests that the Saudis are more than happy with a Brent price above $80 or that Opec, more generally, is not considering raising output."