Oil futures were little changed on Monday after paring earlier losses despite Saudi Arabia`s pledge to raise crude production to a record high, two weeks before U.S. sanctions potentially choke off Iranian supplies.
Saudi Energy Minister Khalid al-Falih told Russia`s TASS news agency that his country had no intention of unleashing a 1973-style oil embargo on Western consumers, but rather was focused on raising output to compensate for supply losses elsewhere, such as Iran.
Falih said Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million. He added that Riyadh had capacity to increase production to 12 million bpd.
"Oil prices are finely balanced in today`s trading session despite the Saudi pledge to boost production. It is still not a foregone conclusion that the kingdom’s production increase will be enough to compensate for the potential output loss from Iran and Venezuela," said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
Brent crude futures were up 3 cents at $79.81 a barrel at 11:54 a.m. EDT (1554 GMT), while U.S. West Texas Intermediate (WTI) was down 15 cents, or 0.2 percent, at $68.97. Earlier in the day, WTI traded as low as $68.27, its lowest since Sept. 14.
The discount of U.S. front-month futures below the second-month rose to 25 cents, its highest since November 2017.
Several U.S. lawmakers, meanwhile, have suggested imposing sanctions on Saudi Arabia over the killing of journalist Jamal Khashoggi. The kingdom, the world`s largest oil exporter, pledged to retaliate against any sanctions with "bigger measures."
Saudi credit default swaps, a form of insurance against a sovereign debt default, have shot up to near one-year highs over the past week, reflecting investor nervousness.
U.S. sanctions on Iran`s oil sector start on Nov. 4 and analysts believe up to 1.5 million bpd in supply could be at risk.
The Organization of the Petroleum Exporting Countries (OPEC) agreed in June to boost supply to make up for the expected disruption to Iranian exports.
"As far as next year`s supply/demand balance is concerned, it`s not justified for them (Saudi Arabia) to increase production," PVM Oil Associates strategist Tamas Varga said.
An internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere, including Iran and Venezuela.
The outlook for demand next year, meanwhile, is deteriorating.
OPEC estimates demand for its crude will fall to an average of 31.8 million bpd next year, from an average 32.8 million bpd this year.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)