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Oil prices end barely higher Monday as traders monitor U.S.-Saudi tensions

By Mayra P. Saefong

Petroleumworld 10 23 2018

Oil futures ended barely higher Monday as the November U.S. benchmark futures contract expired and traders took stock of U.S.-Saudi tensions over the killing of journalist Jamal Khashoggi.

Several U.S. lawmakers from both sides of the aisle called for sanctions on the kingdom over the weekend as Treasury Secretary Steven Mnuchin prepared to visit Saudi Arabia Monday. Mnuchin told reporters that the administration's relationship with Saudi Arabia was critical to the U.S. plan to thwart Iran's effort to become the region's dominant power, according to news reports .

Even so, tensions between Saudi Arabia and the international community are “not expected to trigger any meaningful disruption to crude supply and export flows," said Robbie Fraser, commodity analyst at Schneider Electric, in a daily market update.

Saudi energy minister, Khalid al-Falih, told Russia's TASS news agency that there was no intention to repeat the 1973 oil embargo that sent global energy prices soaring.

Against that backdrop, West Texas Intermediate crude for November delivery CLX8, +0.19%  rose 5 cents, or less than 0.1%, to finish at $69.17 a barrel on the New York Mercantile Exchange after spending much of the session trading lower. The expiration of the November contract at the day's settlement often contributes to volatility. December WTI crude CLZ8, +0.29% which is now the front-month contract, added 8 cents or 0.1%, to $69.36.

Global benchmark December Brent crude LCOZ8, +0.25%  edged up by a nickel, or less than 0.1%, to $79.83 a barrel on the ICE Futures Europe exchange.

Saudi Arabia said early Saturday that Khashoggi died in the country's Istanbul consulate after a fistfight and that 18 Saudi nationals had been detained in connection with the incident. The Saudi account, which came after previous denials that Khashoggi had been harmed, has been met with disbelief by critics.

“The Saudi version of events throws up more questions than it answers…Thus the international pressure on the Saudi leadership remains in place, as does the possibility of sanctions,” wrote analysts at Commerzbank, in a note.

The market reaction, however, shows traders appear to think there is little chance of such a scenario, the Commerzbank analysts said.

But other supply concerns, including a continued fall in Venezuela output and the full implementation of U.S. sanctions on Iranian oil on Nov. 4, remain in place, they said.

James Williams, energy economist at WTRG Economics, also pointed out that during the interview with TASS, al-Falih “hinted that some problems might make Saudi Arabia consider not maintaining spare capacity. That alone is worth a little bump in prices.”

Al-Falih told TASS that “it is very important for the world to support Saudi Arabia, because it is the only country that invest heavily in spare capacities. We invest tens of billions of dollars constantly to in-build capacity we do not use, only in shortage situations.”

Investors might also brace for another rise in U.S. crude inventories later this week as refinery maintenance season continues. Oil was pressured last week in part due to a fourth straight rise in U.S. crude inventories.

WTI crude, the U.S. benchmark, fell 3.1% last week, while Brent shed 0.8%.

In other energy trade on Monday, November gasoline RBX8, +0.33%  lost 0.4% to $1.907 a gallon, while November heating oil HOX8, +0.27%  settled 0.7% higher at $2.318. November natural-gas futures NGX18, -0.03%  lost nearly 3.5% to $3.138 per million British thermal units.


Story by Mayra P. Saefong from MarketWatch.
10 22 2018 19:33 GMT

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