Oil poised for fourth weekly gain as supply concerns persist

Oil is heading for the longest run of weekly gains since January on concern that higher Saudi and Russian output may not ease a supply crunch as impending US sanctions squeeze Iranian exports.

Futures in New York climbed as much as 0.8%, on course for a fourth weekly gain. Prices may hit $100 this fall given the uncertainty over Iran, Russian Energy Minister Alexander Novak told radio station Business FM. Saudi Arabia’s Energy Minister Khalid Al-Falih has said the kingdom is increasing output and will provide crude if there is demand for it, signaling it’s ready to cover any shortfall.

Saudi Arabia is juggling intense pressure from US President Donald Trump to boost output and ease oil prices, with preserving the balance it’s successfully brought to the market. The kingdom has boosted production to near a record and may raise it further next month, but in doing so it reduces spare capacity, limiting it’s ability to react to other supply shocks.

“The Saudis won’t flood the market and they don’t want to see it oversupplied,” said Giovanni Staunovo, an analyst at UBS Group AG. “Their demand is picking up because Iran volumes are falling. But the price for the Saudi strategy to cover those supply losses are extreme low spare capacity, and that worries the market.”

West Texas Intermediate for November delivery advanced as much as 61 cents to $74.94 a barrel on the New York Mercantile Exchange and traded at $74.55 at 10:53. The contract fell $2.08 to $74.33 on Thursday. Prices are up 1.8% for the week. Total volume traded Friday was about 40% below the 100-day average.

Brent for December settlement fell 14c to $84.44 a barrel on the London-based ICE Futures Europe exchange, after declining $1.71 Thursday. Still, prices are up 2.1% this week. The global benchmark crude traded at a $10.06 premium to WTI for the same month.

Novak is not alone in predicting prices may return to three-digit levels last seen in 2014. As Iran’s customers are cutting purchases and Venezuela’s industry continues to struggle, trading giant Mercuria Energy said last month Brent may spike over $100 in the fourth quarter and Trafigura expects it in early 2019.

While Goldman Sachs isn’t that bullish, the Wall Street bank sees a risk of oil holding above $80 toward the end of the year.

Other oil-market news

Saudi Arabia raised pricing for all oil grades for November shipments to Asia and the Mediterranean region. An additional  1.7 million barrels of oil were stowed in tanks at a key US pipeline hub in Oklahoma in the five days to October 2, data provider Genscape was said to have reported.

US crude inventories rose 7.98 million barrels last week, the biggest gain since March 2017, the Energy Information Administration reported on Wednesday.