Saudis indicate comfort with higher oil prices

Saudis indicate comfort with higher oil prices

LONDON, Sept 20 (Reuters) - Oil prices steadied on Thursday but the market remained bullish after news of another fall in us crude inventories and on signs that OPEC may not raise production enough to compensate for the loss of Iranian exports hit by USA sanctions.

"We're stuck in a range here", said Tariq Zahir, managing member at Tyche Capital Advisors in NY, with prices supported by sanctions on Iranian supplies and pressured by the potential Chinese demand could wane.

USA crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, government data showed. USA light crude oil was up 30 cents at $71.42 a barrel after rising almost 2% on Wednesday.

Last year, Iran exported a monthly average of 2.5 mb per day, including 2.1 mb/d of crude oil and 400,000 b/d of gas condensate.

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The so-called 'OPEC+' coalition meets on Sunday in Algeria to discuss how to allocate that 1 million bpd increase within its quota framework.

The rise in crude oil prices this quarter could contribute to increases in cash from operations and capital expenditures, said the EIA in its review, which included Big Oil, Rosneft, and Sinopec, and many smaller companies and USA companies focused on shale production.

The rebound gained steam earlier this year after production problems in countries like Venezuela and Libya caused the group to cut more deeply than they intended.

Outside the USA, dealers are focusing on the effect of the US sanctions against Iran since the sanction targets oil exports from November. In a bid to mop up excess supply, OPEC teamed up with Russian Federation two years ago to cut production.

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Such technical arguments may inflame passions inside OPEC delegations, but they're drowned out by Trump's Twitter bullhorn, which was blasting loud and clear on Thursday.

The market's expectation was a draw of 2.7 million barrels in crude oil inventories.

Jason Gammel, analyst at United States bank Jefferies, said he expects Saudi Arabia to try to keep the oil market adequately supplied into 2019, "but at the cost of spare capacity", a key supply buffer to prevent oil price volatility. Helped by hydraulic fracturing and horizontal drilling, production began increasing before a large drop in prices in mid-2014 forced producers to scale back. Many buyers have already scaled back Iranian purchases, and it was unclear how easily other producers, such as Saudi Arabia, Iraq and Russian Federation, can compensate for lost supply.

Consultancy JBC Energy said in a note "The market may have taken this as a sign that supplies may not go up much in response to further declines in Iranian crude exports".

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However, many Americans are unhappy to see that energy prices are on the rise.

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