NEW YORK (Reuters) - 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 LCOc1 futures rose 98 cents, or 1.3 percent, to settle at $79.03 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 gained 94 cents to settle at $69.85 a barrel, a 1.4 percent increase.
Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed U.S. crude inventories rose by 1.2 million barrels in the week to Sept. 14 to 397.1 million, compared with analysts’ expectations for a decrease of 2.7 million barrels.
Official U.S. government data is due to be released on Wednesday.
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, that the kingdom was currently comfortable with prices above $80 per barrel, at least for the short term.
Bloomberg 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 previously reported that Saudi Arabia wants oil to stay between $70 and $80 a barrel for now, as the world’s biggest crude exporter strikes a balance between maximizing 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 the long-term price would stand around $50 a barrel.
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 Defense Ministry said a Russian military plane was shot down by Syrian anti-aircraft systems, but accused Israel of indirectly causing the incident, saying Israeli jets nearby had put the Russian plane in the path of danger.
Russia has told Israel it will take all necessary measures to protect its military personnel in Syria, the Foreign Ministry in Moscow said.
The longer-term outlook remains weighed down, however, by an escalation in the China-U.S. trade war that has clouded the outlook for crude demand.
China, one of the world’s largest oil consumers, on Tuesday added $60 billion of U.S. products to its import tariff list. The move was in retaliation for President Donald Trump’s planned levies on $200 billion worth of Chinese goods.
On Monday, the Trump administration said it would begin to levy new tariffs of 10 percent on about $200 billion of Chinese products next Monday, with the tariffs to go up to 25 percent by the end of 2018.
The tariffs are likely to limit economic activity in both China and the United States.
“The brinkmanship between Beijing and Washington has the potential to severely impact the competitiveness of U.S. crude oil and petroleum products in the Chinese market, and it will also deter Chinese investment in the U.S. energy sector,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
Reporting by Stephanie Kelly in New York; Additional reporting by Julia Payne in London, Meng Meng and Aizhu Chen in Beijing and Roslan Khasawneh in Singapore; Editing by Marguerita Choy and Peter Cooney