USA oil prices surge as inventory draw adds to supply concerns

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Russian Federation says it's ready to talk with the USA on how to maintain global oil market balance.

WTI Crude was up 0.8 per cent at $69.54, while Brent Crude was trading up 0.79 per cent at $78.71.

Benchmark Brent crude already is nearing $80 a barrel and analysts believe it may go even higher as production remains low.

The warning came from the group's top official as looming unilateral USA sanctions on oil sales by Iran, OPEC's third-biggest supplier, are scheduled to take effect on November 4. Iran's share of OPEC revenues increased to 10% in 2017 to its highest level since 1999, recovering from declines from 2012 through 2015 that resulted from sanctions targeting Iran's oil exports.

"Considering the high demand and low supply in the market, America's sanctions can not drop Iran's oil sale to zero".

USA crude inventories rose by 1.2 million barrels to 397.1 million in the week to September 14, according to the American Petroleum Institute (API).

Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was now comfortable with prices above US$80 per barrel, at least for the short term.

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Saudi officials were careful to avoid pinpointing a price target in their conversations, saying that while the kingdom has no desire to push prices higher than $80 a barrel, it may no longer be possible to avoid it.

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.

Oil futures also drew support from geopolitical risk on Tuesday.

The U.S. Energy Information Administration said on Monday that the country's oil output from its seven major hale formations is expected to rise by 79,000 per day to 7.6 million bpd next month.

Intensifying trade tensions between the USA and China could hit economic growth and reduce crude oil demand next year, while supply disruption risks could push prices further upward, according to the International Energy Agency (IEA).

Iranian oil exports have plunged about 35 percent since April, the month before Trump ripped up the diplomatic deal that President Barack Obama negotiated to curtail Tehran's nuclear program and announced new oil sanctions.

The potential for a full-blown trade war between the US and China could also undercut demand by reducing economic growth globally.

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