Crude oil futures rise on Saudi tensions

London

CRUDE OIL futures rose on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries, though concerns over the long-term demand outlook dragged on prices.

Benchmark Brent crude oil jumped by US$1.49 a barrel to a high of US$81.92 before slipping to US$80.83, up 40 US cents. By 0745 GMT, US crude was last up 20 US cents at US$71.54.

"Growing tensions over the disappearance of journalist Jamal Khashoggi at the Saudi consulate in Istanbul has proved supportive for oil prices," said ING commodities strategist Warren Patterson.

Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh and a US resident, disappeared on Oct 2 after visiting the Saudi consulate in Istanbul.

US President Donald Trump threatened "severe punishment" if it is found that Khashoggi was killed in the consulate.

The kingdom said it would retaliate to any action against it over the Khashoggi case, state news agency SPA reported on Sunday, quoting an official source.

"This has raised concerns that the Saudis may use oil as a tool for retaliation if any sanctions or other action is taken against it," Mr Patterson said.

Exerting downward pressure on prices, Friday's monthly report from the International Energy Agency, the West's energy watchdog, said that the market looked "adequately supplied for now" and the agency cut its forecasts for world oil demand growth this year and next.

OPEC, Russia and other oil producers, such as US shale companies, had increased production sharply since May, the IEA said, raising world crude output by 1.4 million barrels per day (bpd).

"I just looked at the IEA numbers in detail and these are very bearish for oil prices," said Commerzbank commodities analyst Carsten Fritsch.

The IEA report came after the secretary general of the Organization of the Petroleum Exporting Countries said that the group saw the oil market as well supplied and that it was wary of creating a glut next year. REUTERS