Oil price climbs on tensions over missing Saudi journalist
Rising world output and fears of a glut next year dragged on prices, mitigating Riyadh's threat of retaliating against any action over the Khashoggi case
London — Crude oil futures rose on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries, though concerns over the long-term demand outlook dragged on prices.
Benchmark Brent crude oil jumped by $1.49 a barrel to a high of $81.92 before slipping to $80.83, up 40c, by 7.45am GMT. US crude was last up 20c at $71.54.
“Growing tensions over the disappearance of journalist Jamal Khashoggi at the Saudi consulate in Istanbul has proved supportive for oil prices,” said ING commodities strategist Warren Patterson.
Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh and a US resident, disappeared on October 2 after visiting the Saudi consulate in Istanbul.
US President Donald Trump threatened “severe punishment” if it is found that Khashoggi was killed in the consulate.
The kingdom 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.
Exerting downward pressure on prices, Friday’s monthly report from the International Energy Agency (IEA), the West’s energy watchdog, said that the market looked adequately supplied for now” and the agency cut its forecasts for world oil demand growth this year and next.
Opec, Russia and other oil producers, such as US shale companies, had increased production sharply since May, the IEA said, raising world crude output by 1.4-million barrels a day.
“I just looked at the IEA numbers in detail and these are very bearish for oil prices,” said Commerzbank commodities analyst Carsten Fritsch.
The IEA report came after the secretary-general of Opec said that the group saw the oil market as well supplied and that it was wary of creating a glut next year.
Société Générale on Monday raised its forecast for Brent crude in the final quarter of this year to $82 a barrel, up from a previously forecast $78, after a sharp rise in prices over the past couple of months pushed Brent up from about $70.
The French wrote that there were “high levels of risk and uncertainty in the oil markets”.