NEW YORK: Oil futures rose more than 1 percent on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels.
Brent crude futures rose $1.08, or 1.4 percent, to $79.13 a barrel, by 10:57 a.m. EDT (1457 GMT).
U.S. West Texas Intermediate (WTI) crude futures gained $1.03 to $69.94 a barrel, a 1.5 percent gain.
Ministers from the Organization of the Petroleum Exporting Countries and non-OPEC producers meet on Sunday to discuss compliance with output policies. OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase.
Bloomberg reported on Tuesday, citing unnamed Saudi sources, the kingdom was currently comfortable with prices above $80 per barrel, at least for the short term.
The news agency reported that while Saudi Arabia had no desire to push prices higher than $80, it may no longer be possible to avoid it. U.S. sanctions affecting Iran's petroleum sector are due to come into force from Nov. 4.
Reuters had previously reported that Saudi Arabia wants oil to stay between $70 and $80 for now as the world's biggest crude exporter strikes a balance between maximising revenue and keeping a lid on prices until U.S. congressional elections.
Russian Energy Minister Alexander Novak said an oil price between $70 and $80 was temporary and sanctions-driven, adding that the long-term price would stand around $50.
U.S. Energy Secretary Rick Perry said last week in Moscow that he did not foresee any price spikes once sanctions came into effect, and was positive about Saudi output.
Oil futures also drew support from geopolitical risk on Tuesday.
Russia's Ministry of Defence said that the Syrian military had accidentally shot down a Russian military plane over Syria, but said it blamed the incident on Israel, the RIA news agency reported.
"This market remains highly reactive to such headlines given some apparent global oil supply tightening that is developing ahead of the official kick-off to the Iranian oil sanctions," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Market participants awaited industry data on Tuesday from the American Petroleum Institute that was expected to show U.S. crude inventories last week fell for a fifth straight week. The data is due to be released at 4:30 p.m. EDT (2030 GMT) while the government's weekly report is due on Wednesday.
TRADE WAR CAPS GAINS
However, the longer-term outlook remains weighed down by an escalation in the China-U.S. trade war that has clouded the outlook for crude demand.
China said it had no choice but to retaliate against new U.S. trade measures after President Donald Trump imposed on Monday 10 percent tariffs on about $200 billion worth of Chinese imports.
On Tuesday, China announced tariffs of 5 to 10 percent, a lower volume than previously planned, on $60 billion of U.S. goods that would become effective on Sept. 24. Trump, meanwhile, accused Beijing of trying to sway the U.S. congressional election by targeting farmers.
The tariffs are likely to limit economic activity in both China and the United States, potentially hitting growth in demand for oil as less fuel is consumed to move goods for trade.