Saudi energy minister says his country would not be able to compensate for possible oil disappearance from global markets once the USA re-imposes its sanctions against Iran.
Benchmark Brent crude oil futures rose 45 cents on the day to US$80.23 a barrel by 0900 GMT, while United States crude futures rose 31 cents to US$69.43 a barrel.
"However, this idea may have been put to bed on Monday when Saudi Energy Minister Khalid al-Falih said that "there is no intention" for such action, and that Saudi Arabia would play a 'constructive and responsible" role in world energy markets.
Front-month Brent crude oil futures were at $79.52 a barrel, down 31 cents, or 0.4%, from their last close.
Top crude oil exporter Saudi Arabia has pledged to keep markets supplied despite its increasing isolation over the killing of Saudi journalist Jamal Khashoggi.
Traders seem to be willing to give Saudi Arabia and Russian Federation the benefit of the doubt that they will be able to offset any loss of Iranian exports, which some estimate to be about 1.5 million barrels per day of crude oil. He added that Riyadh had capacity to increase production to 12 million bpd.
"The worldwide pressure on the Saudi leadership remains in place, as does the possibility of sanctions", Commerzbank said in a daily note.
Furthermore, today's early price action suggests that traders believe the market will be amply supplied when the sanctions against Iran begin on November 4.
While the Organization of the Petroleum Exporting Countries (OPEC) agreed in June to boost supply to make up for expected Iran disruptions, an internal document reviewed by Reuters suggested that OPEC is struggling to add barrels to the market as an increase in Saudi Arabian supply was offset by declines in Iran, Venezuela and Angola.
The outlook for demand next year, meanwhile, is deteriorating.
The ongoing trade dispute between China and the United States will nearly certainly erode demand, analysts say. Even if it didn't, rising US production would likely offset any increase in global demand. "China trade war will hit markets in 2019 and could act as a considerable drag on oil demand next year, raising the possibility of the market returning to surplus", said Emirates NBD bank in a note.